Westfield Financial, Inc. Reports Results For The Quarter And Year Ended December 31, 2012

Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.6 million, or $0.07 per diluted share, for the quarter ended December 31, 2012, compared to $1.4 million, or $0.06 per diluted share, for the quarter ended September 30, 2012, and $1.5 million, or $0.06 per diluted share, for the quarter ended December 31, 2011.

For the year ended December 31, 2012, net income was $6.3 million, or $0.26 per diluted share, compared to $5.9 million, or $0.22 per diluted share, for 2011.

Selected financial highlights for the fourth quarter 2012 include:
  • During the fourth quarter 2012, commercial and industrial loans increased $10.7 million to $126.1 million at December 31, 2012. In addition, commercial real estate loans increased $5.4 million to $245.8 million at December 31, 2012. The increase in both commercial and industrial loans and commercial real estate loans was primarily due to new loan originations. 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 repurchased 2,424,554 shares of its common stock pursuant to its stock repurchase programs for a total of $17.6 million, which equates to 9.6% of the outstanding shares as of September 30, 2012. The shares were repurchased at an average price of $7.25.
  • Net interest and dividend income decreased $109,000 to $7.6 million for the quarter ended December 31, 2012, compared to $7.7 million for the quarter ended September 30, 2012. The decrease in the yield on earning assets was greater than the decrease in the cost of funds due to the low rate environment.
  • The Bank prepaid repurchase agreements in the amount $28.0 million and incurred a prepayment expense of $1.0 million. The repurchase agreements had a weighted average cost of 3.06% and the prepayment will decrease the cost of funds which will help increase the net interest margin. The repurchase agreements were paid off during the last week of December 2012 and therefore had minimal impact to the cost of funds in the fourth quarter 2012.
  • There was no provision for loan losses for the fourth quarter 2012, compared to $218,000 for the third quarter 2012. There was net loan growth during the fourth quarter; however, an overall positive change in the risk profile of the loan portfolio offset the need for a provision.

Income Statement Discussion and Analysis

Net interest and dividend income decreased $109,000 to $7.6 million for the quarter ended December 31, 2012, compared to $7.7 million for the quarter ended September 30, 2012. The net interest margin decreased 5 basis points from the third quarter 2012. This resulted from a decrease of 9 basis points in the yield on average interest-earning assets partially offset by a decrease of 5 basis points in the cost of interest-bearing liabilities and an increase in average interest-earning assets of $6.4 million.

Net interest and dividend income increased $50,000 to $7.6 million for the three months ended December 31, 2012, as compared to $7.5 million for the same period in 2011. The increase in income was primarily the result of a $70.5 million increase in average interest-earning assets, driven by increases in both loans and securities.

For the year ended December 31, 2012, net interest and dividend income decreased $97,000 to $30.4 million, compared to $30.5 million for 2011. The net interest margin, on a tax-equivalent basis, was 2.53% and 2.67% for the year ended December 31, 2012 and 2011, respectively. The decrease in the net interest margin was due to the yield on average interest-earning assets decreasing 35 basis points, partially offset by a decrease of 26 basis points in the cost of interest-bearing liabilities, both occurring as a result of the low interest rate environment.

Noninterest income increased $173,000 for the fourth quarter 2012 compared to the third quarter 2012 primarily due to $156,000 in income from a commercial loan transaction and an increase of $98,000 in fee income from the third-party mortgage company. This increase in fee income was due to management’s decision to refer low-rate residential loans to the third-party mortgage company.

Net gains on sales of securities were $1.1 million for the fourth quarter 2012. Management sold mortgage-backed securities that were expected to prepay rapidly and decrease the expected yield. The Bank also prepaid repurchase agreements in the amount of $28.0 million and incurred a prepayment expense of $1.0 million. The repurchase agreements had a weighted average cost of 3.06% and the prepayment will decrease the cost of funds which will help increase the net interest margin. The repurchase agreements were paid off during the last week of December 2012 and therefore had minimal impact to the cost of funds in the fourth quarter 2012.

Noninterest expense decreased $52,000 to $6.7 million for the fourth quarter 2012, compared to $6.8 million for the third quarter 2012. Salaries and benefits decreased $250,000 to $3.9 million in the fourth quarter primarily due to the completion of vesting of certain stock-based compensation. This was partially offset by an increase of $178,000 in other real estate owned (“OREO”) expense primarily due to the write down of an OREO property.

Noninterest expense increased $1.2 million to $27.2 million for the year ended December 31, 2012, compared to $26.0 million for 2011. Salaries and benefits increased $973,000 to $16.5 million for the year ended December 31, 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.

Balance Sheet Growth

Total assets were stable at $1.3 billion at December 31, 2012, compared to September 30, 2012. Securities decreased $28.6 million to $635.8 million at December 31, 2012, from $664.4 million at September 30, 2012. This was due to using cash flow from securities along with securities sales to fund loan growth and share repurchases. Total assets increased $38.2 million from December 31, 2011.

During the fourth quarter 2012, commercial and industrial loans increased $10.7 million to $126.1 million at December 31, 2012. In addition, commercial real estate loans increased $5.4 million to $245.8 million at December 31, 2012. The increase in both commercial and industrial loans and commercial real estate loans was primarily due to new loan originations. This was offset by a decrease of $4.1 million residential real estate loans, which were $219.7 million at December 31, 2012. This decrease was due to management’s decision to refer low-rate residential loans to the third-party mortgage company.

Total deposits decreased $1.0 million to $753.4 million at December 31, 2012, compared to $754.4 million at September 30, 2012. For the year ended December 31, 2012, total deposits increased $20.4 million. Short-term borrowings and long-term debt increased $10.3 million to $348.8 million at December 31, 2012, compared to $338.5 million at September 30, 2012. The increase was due to the increase in borrowings from the Federal Home Loan Bank of Boston, partially offset by the prepayment of repurchase agreements in the amount of $28.0 million.

Shareholders’ equity was $189.2 million and $211.7 million, which represented 14.5% and 16.1% of total assets at December 31, 2012, and September 30, 2012, respectively. The decrease in shareholders’ equity during the quarter reflects the repurchase of 2.4 million shares of our common stock at a cost of $17.6 million pursuant to the Company’s stock repurchase programs, the payment of regular and special dividends amounting to $3.7 million and a decrease in other comprehensive income of $2.8 million, due to the change in market value of securities. This was partially offset by net income of $1.6 million for the quarter ended December 31, 2012.

On August 28, 2012, the Board of Directors authorized a stock repurchase program under which the Company was authorized to purchase up to 1,278,560 shares, or 5% of its outstanding common stock. The stock repurchase program was completed during the fourth quarter of 2012. On December 6, 2012, the Board of Directors authorized a new stock repurchase program under which the Company may purchase up to 2,427,000 shares, or 10% of its outstanding common stock. There were 1,006,662 shares remaining to be purchased under the repurchase program as of December 31, 2012.

Credit Quality

The allowance for loan losses was $7.8 million at December 31, 2012, and $8.2 million at September 30, 2012, representing 1.31% and 1.40% of total loans, respectively. This represents 259% and 282% of nonperforming loans at December 31, 2012, and September 30, 2012, respectively.

An analysis of the changes in the allowance for loan losses is as follows:
        Three Months Ended
December 31,   September 30,   December 31,
2012 2012 2011
(In thousands)
 
Balance, beginning of period $ 8,176 $ 8,065 $ 7,087
Provision - 218 677
Charge-offs (399 ) (123 ) (7 )
Recoveries   17     16     7  
Balance, end of period $ 7,794   $ 8,176   $ 7,764  
 

During the fourth quarter 2012, nonperforming loans increased $111,000 to $3.0 million, representing 0.51% of total loans at December 31, 2012. Loans delinquent 30 – 89 days were $1.2 million at December 31, 2012, and $1.6 million September 30, 2012. 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 January 29, 2013, the Board of Directors approved the declaration of a regular cash dividend of $0.06 per share payable on February 20, 2013, to all shareholders of record on February 6, 2013.”

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   Year Ended
December 31,   September 30,   December 31, December 31,

2012
 

2012
 

2011

2012
 

2011
 
INTEREST AND DIVIDEND INCOME:
Loans $ 6,369 $ 6,476 $ 6,381 $ 25,603 $ 25,318
Securities 4,228 4,353 4,530 17,399 19,624
Other investments - at cost 23 23 15 94 62
Short-term investments   6     1     -     8     1  
Total interest and dividend income   10,626     10,853     10,926     43,104     45,005  
 
INTEREST EXPENSE:
Deposits 1,478 1,505 1,699 6,142 7,589
Long-term debt 1,534 1,618 1,659 6,406 6,731
Short-term borrowings   20     27     24     115     147  
Total interest expense   3,032     3,150     3,382     12,663     14,467  
 
Net interest and dividend income 7,594 7,703 7,544 30,441 30,538
 
PROVISION FOR LOAN LOSSES   -     218     677     698     1,206  
 
Net interest and dividend income after provision for loan losses   7,594     7,485     6,867     29,743     29,332  
 
NONINTEREST INCOME:
Total other-than-temporary impairment losses on securities - - - - (603 )
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss   -     -     -     -     501  
Net other-than-temporary impairment losses recognized in income - - - - (102 )
Service charges and fees 933 617 509 2,581 1,973
Income from bank-owned life insurance 387 390 395 1,519 1,546
Loss on prepayment of borrowings (1,017 ) - - (1,017 ) -
Gain on sales of securities, net 1,051 174 206 2,907 414
Loss on sale of other real estate owned   -     -     -     -     (25 )
Total noninterest income   1,354     1,181     1,110     5,990     3,806  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,938 4,188 3,847 16,530 15,557
Occupancy 703 663 645 2,775 2,671
Data processing 511 544 480 2,106 1,917
Professional fees 470 432 508 1,872 2,033
OREO expense 189 11 18 237 70
FDIC insurance 161 152 128 611 683
Other   774     808     720     3,092     3,027  
Total noninterest expense   6,746     6,798     6,346     27,223     25,958  
 
INCOME BEFORE INCOME TAXES 2,202 1,868 1,631 8,510 7,180
 
INCOME TAX PROVISION   648     481     102     2,256     1,306  
NET INCOME $ 1,554   $ 1,387   $ 1,529   $ 6,254   $ 5,874  
 
Basic earnings per share $ 0.07 $ 0.06 $ 0.06 $ 0.26 $ 0.22
 
Weighted average shares outstanding 23,041,733 24,391,585 26,106,911 24,501,951 26,482,064
 
Diluted earnings per share $ 0.07 $ 0.06 $ 0.06 $ 0.26 $ 0.22
 
Weighted average diluted shares outstanding 23,041,733 24,393,109 26,190,326 24,519,515 26,589,510
 
Other Data:
 
Return on average assets (1) 0.47 % 0.42 % 0.48 % 0.48 % 0.47 %
 
Return on average equity (1) 3.09 % 2.61 % 2.71 % 2.97 % 2.65 %
 

(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, September 30, December 31,

2012

2012

2011
Cash and cash equivalents $ 11,761 $ 11,653 $ 21,105
Securities available for sale, at fair value 621,507 650,400 617,537
Federal Home Loan Bank of Boston and other restricted stock - at cost 14,269 14,045 12,438
 
Loans 594,918 582,732 554,156
Allowance for loan losses   7,794     8,176     7,764  
Net loans 587,124 574,556 546,392
 
Bank-owned life insurance 46,222 45,835 44,040
Other real estate owned 964 1,130 1,130
Other assets   19,615     19,408     20,622  
 
TOTAL ASSETS $ 1,301,462   $ 1,317,027   $ 1,263,264  
 
Total deposits $ 753,413 $ 754,408 $ 732,958
Short-term borrowings 69,934 41,352 52,985
Long-term debt 278,861 297,166 247,320
Securities pending settlement - 352 363
Other liabilities   10,067     12,092     10,650  
 
TOTAL LIABILITIES 1,112,275 1,105,370 1,044,276
 
TOTAL SHAREHOLDERS' EQUITY   189,187     211,657     218,988  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,301,462   $ 1,317,027   $ 1,263,264  
 
Book value per share $ 8.28 $ 8.37 $ 8.14
 
Other Data:
 
30- 89 day delinquent loans $ 1,162 $ 1,577 $ 1,848
 
Nonperforming loans 3,009 2,898 2,933
 
Nonperforming loans as a percentage of total loans 0.51 % 0.50 % 0.53 %
 
Nonperforming assets as a percentage of total assets 0.31 % 0.31 % 0.32 %
 
Allowance for loan losses as a percentage of nonperforming loans 259.02 % 282.13 % 264.71 %
 
Allowance for loan losses as a percentage of total loans 1.31 % 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 December 31, 2012 and September 30, 2012, along with the three months and year ended December 31, 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
December 31, 2012   September 30, 2012
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 585,026 $ 6,408 4.38 % $ 585,612 $ 6,517 4.45 %
Securities(2) 642,554 4,396 2.74 643,701 4,521 2.81
Other investments - at cost 15,929 23 0.58 15,920 23 0.58
Short-term investments(3)   13,330   6 0.19   5,220   1 0.08
Total interest-earning assets 1,256,839   10,833 3.45 1,250,453   11,062 3.54
Total noninterest-earning assets   62,744   66,183
 
Total assets $ 1,319,583 $ 1,316,636
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 56,089 46 0.33 $ 58,845 54 0.37
Savings accounts 92,432 38 0.16 93,831 39 0.17
Money market accounts 177,358 189 0.43 176,729 197 0.45
Time certificates of deposit   323,952   1,205 1.49   316,612   1,215 1.54
Total interest-bearing deposits 649,831 1,478 646,017 1,505
Short-term borrowings and long-term debt   345,033   1,554 1.80   343,696   1,645 1.91
Interest-bearing liabilities   994,864   3,032 1.22   989,713   3,150 1.27
Noninterest-bearing deposits 112,139 104,402
Other noninterest-bearing liabilities   12,732   11,075
Total noninterest-bearing liabilities   124,871   115,477
 
Total liabilities 1,119,735 1,105,190
Total equity   199,848   211,446
Total liabilities and equity $ 1,319,583 $ 1,316,636
Less: Tax-equivalent adjustment(2)   (207)   (209)
Net interest and dividend income $ 7,594 $ 7,703
Net interest rate spread(4) 2.23 % 2.27 %
Net interest margin(5) 2.47 % 2.52 %
Average interest-earning
assets to average interest-bearing liabilities 126.33 126.35
 
(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 December 31,
2012   2011
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 585,026 $ 6,408 4.38 % $ 544,577 $ 6,422 4.72 %
Securities(2) 642,554 4,396 2.74 618,421 4,719 3.05
Other investments - at cost 15,929 23 0.58 14,123 15 0.42
Short-term investments(3)   13,330   6 0.19   9,242   - 0.00
Total interest-earning assets 1,256,839   10,833 3.45 1,186,363   11,156 3.76
Total noninterest-earning assets   62,744   66,687
 
Total assets $ 1,319,583 $ 1,253,050
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 56,089 46 0.33 $ 76,874 132 0.69
Savings accounts 92,432 38 0.16 99,805 88 0.35
Money market accounts 177,358 189 0.43 128,095 190 0.59
Time certificates of deposit   323,952   1,205 1.49   319,382   1,289 1.61
Total interest-bearing deposits 649,831 1,478 624,156 1,699
Short-term borrowings and long-term debt   345,033   1,554 1.80   295,868   1,683 2.28
Interest-bearing liabilities   994,864   3,032 1.22   920,024   3,382 1.47
Noninterest-bearing deposits 112,139 98,789
Other noninterest-bearing liabilities   12,732   10,526
Total noninterest-bearing liabilities   124,871   109,315
 
Total liabilities 1,119,735 1,029,339
Total equity   199,848   223,711
Total liabilities and equity $ 1,319,583 $ 1,253,050
Less: Tax-equivalent adjustment(2)   (207)   (230)
Net interest and dividend income $ 7,594 $ 7,544
Net interest rate spread(4) 2.23 % 2.29 %
Net interest margin(5) 2.47 % 2.60 %
Average interest-earning
assets to average interest-bearing liabilities 126.33 128.95
 
(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.
 
 

        Year Ended December 31,
2012   2011
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 573,642 $ 25,762 4.49 % $ 536,084 $ 25,485 4.75 %
Securities(2) 638,467 18,110 2.84 619,704 20,376 3.29
Other investments - at cost 15,287 94 0.61 14,034 61 0.43
Short-term investments(3) 11,074 8 0.07 7,503 1 0.01
Total interest-earning assets 1,238,470 43,974 3.55 1,177,325 45,923 3.90
Total noninterest-earning assets 64,629 70,133
 
Total assets $ 1,303,099 $ 1,247,458
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 61,277 266 0.43 $ 85,094 762 0.90
Savings accounts 95,129 186 0.20 104,112 515 0.49
Money market accounts 170,171 807 0.47 99,319 619 0.62
Time certificates of deposit 318,000 4,883 1.54 332,327 5,693 1.71
Total interest-bearing deposits 644,577 6,142 620,852 7,589
Short-term borrowings and long-term debt 332,129 6,521 1.96 303,909 6,878 2.26
Interest-bearing liabilities 976,706 12,663 1.30 924,761 14,467 1.56
Noninterest-bearing deposits 104,454 91,024
Other noninterest-bearing liabilities 11,179 9,754
Total noninterest-bearing liabilities 115,633 100,778
 
Total liabilities 1,092,339 1,025,539
Total equity 210,760 221,919
Total liabilities and equity $ 1,303,099 $ 1,247,458
Less: Tax-equivalent adjustment(2) (870) (918)
Net interest and dividend income $ 30,441 $ 30,538
Net interest rate spread(4) 2.24 % 2.34 %
Net interest margin(5) 2.53 % 2.67 %
Average interest-earning
assets to average interest-bearing liabilities 126.80 127.30
 
(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

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