Westfield Financial, Inc. Reports Results For The Quarter Ended September 30, 2012 And Declares Regular And Special Dividends

Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.4 million, or $0.06 per diluted share, for the quarter ended September 30, 2012, compared to $974,000, or $0.04 per diluted share, for the quarter ended June 30, 2012, and $1.5 million, or $0.06 per diluted share, for the quarter ended September 30, 2011.

For the nine months ended September 30, 2012, net income was $4.7 million, or $0.19 per diluted share, compared to $4.3 million, or $0.16 per diluted share, for the same period in 2011.

Selected financial highlights for the third quarter 2012 include:
  • Net interest and dividend income was stable at $7.7 million for both the quarter ended September 30, 2012, and June 30, 2012, respectively. The net interest margin decreased 6 basis points from the second quarter 2012. This resulted from a decrease of 6 basis points in the yield on interest-earning assets partially offset by a decrease of 3 basis points in the cost of interest-bearing liabilities and an increase in interest-earning assets of $12.5 million.
  • Noninterest income increased $280,000 primarily due to increases of $107,000 in income from bank-owned life insurance (“BOLI”) and $70,000 in fee income from the third-party mortgage company. In the second quarter 2012, management redeemed certain BOLI policies, which resulted in a charge to noninterest income of $102,000 for transferring the policies to a different carrier. In the third quarter 2012, the Bank recorded an increase of $70,000 in fees from the third-party mortgage company which was due to the referral of low rate residential loans to the mortgage company, rather than retaining them on the Bank’s balance sheet.
  • Commercial real estate loans increased $6.1 million to $240.4 million and residential loans increased $1.0 million to $223.8 million. This was offset by a decrease of $8.3 million in commercial and industrial loans, which were $115.4 million at September 30, 2012. Commercial and industrial loans were impacted by lower utilization of lines of credit, which decreased by $4.8 million during the quarter. While in prior quarters management has used residential loan growth to supplement the loan portfolio, the long-term strategy remains focused on commercial lending. The Company hired two experienced commercial lenders during the second half of 2012.

Income Statement Discussion and Analysis

Net interest and dividend income was stable at $7.7 million for both the third and second quarters of 2012. The net interest margin, on a tax-equivalent basis, was 2.52% for the third quarter 2012, compared to 2.58% for the second quarter 2012. This resulted from a decrease of 6 basis points in the yield on interest-earning assets partially offset by a decrease of 3 basis points in the cost of interest-bearing liabilities and an increase in interest-earning assets of $12.5 million.

Net interest and dividend income increased $84,000 to $7.7 million for the three months ended September 30, 2012, as compared to $7.6 million for the same period in 2011. The increase in income was primarily the result of a $72.2 million increase in average interest-earning assets, driven by increases in both loans and securities.

For the nine months ended September 30, 2012, net interest and dividend income decreased $149,000 to $22.8 million, compared to $23.0 million for the same period in 2011. The net interest margin, on a tax-equivalent basis, was 2.55% and 2.69% for the nine months ended September 30, 2012 and 2011, respectively. The decrease in the net interest margin was due to the yield on interest-earning assets decreasing 35 basis points, partially offset by a decrease of 28 basis points in the cost of interest-bearing liabilities, both occurring as a result of the low interest rate environment.

Noninterest income increased $280,000 for the third quarter 2012 primarily due to increases of $107,000 in income from BOLI and $70,000 in fee income from the third-party mortgage company. In the second 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 redemption of BOLI resulted in a charge to noninterest income of $102,000 for transferring the policies to a different carrier. In the third quarter 2012, the Bank recorded an increase of $70,000 in fees from the third-party mortgage company due to management’s decision to refer low rate residential loans to the third-party mortgage company.

Noninterest expense was $6.8 million for both the quarters ended September 30, 2012, and June 30, 2012. Salaries and benefits increased $61,000 to $4.2 million in the third quarter and were offset by a decrease of $100,000 in professional fees primarily due to a one-time expense in the second quarter for $74,000 regarding the change of a retirement plan administrator.

Noninterest expense increased $863,000 to $20.5 million for the nine months ended September 30, 2012, compared to $19.6 million for the same period in 2011. Salaries and benefits increased $883,000 to $12.6 million for the nine months ended September 30, 2012, which was due to normal increases in salaries and benefits and the hiring of new personnel, particularly in the commercial lending and compliance divisions.

Income taxes were $481,000 for the third quarter 2012 and $561,000 for the second quarter 2012. This represents 25.7% and 36.5% of income before taxes for third and second quarters of 2012, respectively. The second quarter 2012 included an additional tax provision of $160,000, or 10.4% of income before income taxes, due to the redemption of BOLI.

Balance Sheet Growth

Total assets were stable at $1.3 billion at September 30, 2012, compared to June 30, 2012. Securities increased $10.5 million to $664.4 million at September 30, 2012, from $653.9 million at June 30, 2012. Cash flow from deposits and borrowings was reinvested in the securities portfolio during the third quarter 2012. Total assets increased $53.8 million from December 31, 2011.

During the third quarter 2012, commercial real estate loans increased $6.1 million to $240.4 million and residential loans increased $1.0 million to $223.8 million. This was offset by a decrease of $8.3 million in commercial and industrial loans, which were $115.4 million at September 30, 2012. Commercial and industrial loans were impacted by lower utilization of lines of credit, which decreased by $4.8 million during the quarter.

Total deposits increased $6.8 million to $754.4 million at September 30, 2012, compared to $747.6 million at June 30, 2012. For the nine months ended September 30, 2012, total deposits increased $21.5 million. Short-term borrowings and long-term debt decreased $10.0 million to $338.5 million at September 30, 2012, compared to $348.5 million at June 30, 2012. This was due to a decrease in borrowings from the Federal Home Loan Bank of Boston.

Shareholders’ equity was $211.7 million and $211.4 million, which represented 16.1% and 16.0% of total assets at September 30, 2012, and June 30, 2012, respectively. The increase in shareholders’ equity during the quarter reflects an increase in other comprehensive income of $4.7 million, due to the change in market value of securities, net income of $1.4 million for the quarter ended September 30, 2012, and an increase of $845,000 related to the recognition of share-based compensation and the exercise of 42,657 stock options. This was partially offset by the repurchase of 708,076 shares of our common stock at a cost of $5.3 million pursuant to the Company’s stock repurchase program and the payment of regular dividends amounting to $1.5 million.

On August 28, 2012, the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 1,278,560 shares, or 5% of its outstanding common stock. There were 1,001,674 shares remaining to be purchased under the repurchase program as of September 30, 2012.

Credit Quality

The allowance for loan losses was $8.2 million at September 30, 2012, and $8.1 million at June 30, 2012, representing 1.40% and 1.38% of total loans, respectively. This represents 282% and 296% of nonperforming loans at September 30, 2012, and June 30, 2012, respectively.

An analysis of the changes in the allowance for loan losses is as follows:
  Three Months Ended
September 30,   June 30,   September 30,
  2012     2012     2011  
(In thousands)
 
Balance, beginning of period $ 8,065 $ 7,803 $ 7,073
Provision 218 260 15
Charge-offs (123 ) (47 ) (16 )
Recoveries   16     49     15  
Balance, end of period $ 8,176   $ 8,065   $ 7,087  

During the third quarter 2012, nonperforming loans increased $174,000 to $2.9 million, representing 0.50% of total loans at September 30, 2012. Loans delinquent 30 – 89 days were $1.6 million at both September 30, 2012, and June 30, 2012. There are no loans 90 or more days past due and still accruing interest.

Declaration of Regular and Special Dividends

James C. Hagan, Chief Executive Officer stated, “The Board of Directors approved the declaration of a regular cash dividend of $0.06 per share and a special cash dividend of $0.10 per share. Both dividends are payable on November 26, 2012, to all shareholders of record on November 12, 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 Nine Months Ended
September 30,   June 30,   September 30, September 30,
  2012       2012       2011     2012       2011  
 
INTEREST AND DIVIDEND INCOME:
Loans $ 6,476 $ 6,377 $ 6,459 $ 19,234 $ 18,936
Securities 4,353 4,507 4,701 13,171 15,096
Other investments - at cost 23 25 14 70 46
Federal funds sold, interest-bearing deposits and other short-term investments   1     1     -     2     1  
Total interest and dividend income   10,853     10,910     11,174     32,477     34,079  
 
INTEREST EXPENSE:
Deposits 1,505 1,523 1,811 4,665 5,891
Long-term debt 1,618 1,623 1,716 4,872 5,071
Short-term borrowings   27     37     28     94     122  
Total interest expense   3,150     3,183     3,555     9,631     11,084  
 
Net interest and dividend income 7,703 7,727 7,619 22,846 22,995
 
PROVISION FOR LOAN LOSSES   218     260     15     698     529  
 
Net interest and dividend income after provision for loan losses   7,485     7,467     7,604     22,148     22,466  
 
NONINTEREST INCOME:
Total other-than-temporary impairment losses on securities - - (536 ) - (576 )
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss   -     -     474     -     474  
Net other-than-temporary impairment losses recognized in income - - (62 ) - (102 )
Service charges and fees 617 521 501 1,649 1,465
Income from bank-owned life insurance 390 283 398 1,132 1,150
Gains on sales of securities, net 174 97 131 1,856 208
Loss on sale of other real estate owned   -     -     (25 )   -     (25 )
Total noninterest income   1,181     901     943     4,637     2,696  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 4,188 4,127 3,997 12,593 11,710
Occupancy 663 703 691 2,072 2,027
Data processing 544 523 473 1,595 1,437
Professional fees 432 532 524 1,401 1,525
FDIC insurance 152 155 207 450 555
OREO expense 11 21 31 48 52
Other   808     772     716     2,317     2,307  
Total noninterest expense   6,798     6,833     6,639     20,476     19,613  
 
INCOME BEFORE INCOME TAXES 1,868 1,535 1,908 6,309 5,549
 
INCOME TAX PROVISION   481     561     414     1,609     1,204  
NET INCOME $ 1,387   $ 974   $ 1,494   $ 4,700   $ 4,345  
 
Basic earnings per share $ 0.06 $ 0.04 $ 0.06 $ 0.19 $ 0.16
 
Weighted average shares outstanding 24,391,585 25,141,989 26,443,449 24,992,245 26,608,490
 
Diluted earnings per share $ 0.06 $ 0.04 $ 0.06 $ 0.19 $ 0.16
 
Weighted average diluted shares outstanding 24,393,109 25,158,171 26,544,257 25,015,664 26,723,947
 
Other Data:
 
Return on average assets (1) 0.42 % 0.30 % 0.48 % 0.48 % 0.47 %
 
Return on average equity (1) 2.61 % 1.83 % 2.65 % 2.93 % 2.62 %

________________

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

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets and Other Data

(Dollars in thousands, except per share data)

(Unaudited)
     
September 30, June 30, December 31,
  2012     2012     2011  
Cash and cash equivalents $ 11,653 $ 20,510 $ 21,105
Securities available for sale, at fair value 650,400 639,845 617,537
Federal Home Loan Bank of Boston and other restricted stock - at cost 14,045 14,045 12,438
 
Loans 582,732 584,006 554,156
Allowance for loan losses   8,176     8,065     7,764  
Net loans 574,556 575,941 546,392
 
Bank-owned life insurance 45,835 45,445 44,040
Other real estate owned 1,130 1,130 1,130
Other assets   19,408     21,717     20,622  
 
TOTAL ASSETS $ 1,317,027   $ 1,318,633   $ 1,263,264  
 
Total deposits $ 754,408 $ 747,551 $ 732,958
Short-term borrowings 41,352 58,574 52,985
Long-term debt 297,166 289,970 247,320
Securities pending settlement 352 - 363
Other liabilities   12,092     11,108     10,650  
 
TOTAL LIABILITIES 1,105,370 1,107,203 1,044,276
 
TOTAL SHAREHOLDERS' EQUITY   211,657     211,430     218,988  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,317,027   $ 1,318,633   $ 1,263,264  
 
Book value per share $ 8.37 $ 8.14 $ 8.14
 
Other Data:
 
30- 89 day delinquent loans $ 1,577 $ 1,571 $ 1,848
 
Nonperforming loans 2,898 2,724 2,933
 
Nonperforming loans as a percentage of total loans 0.50 % 0.47 % 0.53 %
 
Nonperforming assets as a percentage of total assets 0.31 % 0.29 % 0.32 %
 
Allowance for loan losses as a percentage of nonperforming loans 282.13 % 296.07 % 264.71 %
 
Allowance for loan losses as a percentage of total loans 1.40 % 1.38 % 1.40 %

The following tables sets forth the information relating to our average balance at, and net interest income for, the three months ended September 30, 2012 and June 30, 2012, along with the three and nine months ended September 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
September 30, 2012   June 30, 2012
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 585,612 $ 6,517 4.45 % $ 568,215 $ 6,416 4.52 %
Securities(2) 643,701 4,521 2.81 644,656 4,693 2.91
Other investments - at cost 15,920 23 0.58 14,988 25 0.67
Short-term investments(3)   5,220   1   0.08   10,110   1   0.04
Total interest-earning assets 1,250,453   11,062   3.54 1,237,969   11,135   3.60
Total noninterest-earning assets   66,183   66,651
 
Total assets $ 1,316,636 $ 1,304,620
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 58,845 54 0.37 $ 62,027 64 0.41
Savings accounts 93,831 39 0.17 96,339 44 0.18
Money market accounts 176,729 197 0.45 169,360 193 0.46
Time certificates of deposit   316,612   1,215   1.54   315,892   1,222   1.55
Total interest-bearing deposits 646,017 1,505 643,618 1,523
Short-term borrowings and long-term debt   343,696   1,645   1.91   334,505   1,660   1.99
Interest-bearing liabilities   989,713   3,150   1.27   978,123   3,183   1.30
Noninterest-bearing deposits 104,402 101,701
Other noninterest-bearing liabilities   11,075   10,919
Total noninterest-bearing liabilities   115,477   112,620
 
Total liabilities 1,105,190 1,090,743
Total equity   211,446   213,877
Total liabilities and equity $ 1,316,636 $ 1,304,620
Less: Tax-equivalent adjustment(2)   (209 )   (225 )
Net interest and dividend income $ 7,703   $ 7,727  
Net interest rate spread(4) 2.27 % 2.30 %
Net interest margin(5) 2.52 % 2.58 %
Ratio of average interest-earning
assets to average interest-bearing liabilities 126.35 126.57

(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 September 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) $ 585,612 $ 6,517 4.45 % $ 547,539 $ 6,498 4.75 %
Securities(2) 643,701 4,521 2.81 608,580 4,881 3.21
Other investments - at cost 15,920 23 0.58 14,048 14 0.40
Short-term investments(3)   5,220   1   0.08   8,080   -   0.00
Total interest-earning assets 1,250,453   11,062   3.54 1,178,247   11,393   3.87
Total noninterest-earning assets   66,183   69,586
 
Total assets $ 1,316,636 $ 1,247,833
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 58,845 54 0.37 $ 86,425 172 0.80
Savings accounts 93,831 39 0.17 103,297 112 0.43
Money market accounts 176,729 197 0.45 104,479 165 0.63
Time certificates of deposit   316,612   1,215   1.54   326,909   1,362   1.67
Total interest-bearing deposits 646,017 1,505 621,110 1,811
Short-term borrowings and long-term debt   343,696   1,645   1.91   300,448   1,744   2.32
Interest-bearing liabilities   989,713   3,150   1.27   921,558   3,555   1.54
Noninterest-bearing deposits 104,402 93,139
Other noninterest-bearing liabilities   11,075   9,179
Total noninterest-bearing liabilities   115,477   102,318
 
Total liabilities 1,105,190 1,023,876
Total equity   211,446   223,957
Total liabilities and equity $ 1,316,636 $ 1,247,833
Less: Tax-equivalent adjustment(2)   (209 )   (219 )
Net interest and dividend income $ 7,703   $ 7,619  
Net interest rate spread(4) 2.27 % 2.33 %
Net interest margin(5) 2.52 % 2.64 %
Average interest-earning
assets to average interest-bearing liabilities 126.35 127.85

(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.
Nine Months Ended September 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) $ 569,820 $ 19,353 4.53 % $ 533,222 $ 19,057 4.77 %
Securities(2) 637,095 13,712 2.87 620,136 15,632 3.36
Other investments - at cost 15,072 70 0.62 14,004 46 0.44
Short-term investments(3)   9,773   2   0.03   6,918   1   0.02
Total interest-earning assets 1,231,760   33,137   3.59 1,174,280   34,736   3.94
Total noninterest-earning assets   65,905   71,294
 
Total assets $ 1,297,665 $ 1,245,574
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 63,019 221 0.47 $ 87,864 630 0.96
Savings accounts 96,034 147 0.20 105,563 427 0.54
Money market accounts 167,758 619 0.49 89,621 430 0.64
Time certificates of deposit   316,001   3,678   1.55   336,689   4,404   1.74
Total interest-bearing deposits 642,812 4,665 619,737 5,891
Short-term borrowings and long-term debt   327,797   4,966   2.02   306,619   5,193   2.26
Interest-bearing liabilities   970,609   9,631   1.32   926,356   11,084   1.60
Noninterest-bearing deposits 101,874 88,408
Other noninterest-bearing liabilities   10,758   9,494
Total noninterest-bearing liabilities   112,632   97,902
 
Total liabilities 1,083,241 1,024,258
Total equity   214,424   221,316
Total liabilities and equity $ 1,297,665 $ 1,245,574
Less: Tax-equivalent adjustment(2)   (660 )   (657 )
Net interest and dividend income $ 22,846   $ 22,995  
Net interest rate spread(4) 2.27 % 2.35 %
Net interest margin(5) 2.55 % 2.69 %
Ratio of average interest-earning
assets to average interest-bearing liabilities 126.91 126.76

(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