Westfield Financial, Inc. (the "Company") (NasdaqGS:WFD), the holding company for Westfield Bank (the "Bank"), reported net income of $1.4 million, or $0.08 per basic and diluted share, for the quarter ended December 31, 2015, compared to $1.7 million, or $0.09 per basic and diluted share, for the quarter ended December 31, 2014. For the year ended December 31, 2015, net income was $5.7 million, or $0.33 per basic and diluted share, compared to $6.2 million, or $0.34 per basic and diluted share, for the same period in 2014.

Selected financial highlights for fourth quarter 2015 include:
  • Total loans increased $93.5 million, or 12.9%, to $818.2 million at December 31, 2015 compared to $724.7 million at December 31, 2014. This was primarily due to increases in residential loans of $63.8 million, commercial real estate loans of $24.6 million and commercial and industrial loans of $2.5 million. On a sequential-quarter basis, total loans increased $11.3 million, or 1.4%, during the fourth quarter of 2015. This was due to an increase in residential loans of $7.4 million and commercial real estate loans of $7.3 million. Commercial and industrial loans decreased $3.4 million primarily due to a decrease in the line of credit utilization during the fourth quarter 2015.
  • Securities decreased $72.9 million, or 14.3%, to $435.9 million at December 31, 2015, compared to $508.8 million at December 31, 2014. On a sequential-quarter basis, securities decreased $20.0 million, or 4.4% at December 31, 2015, compared to $455.9 million at September 30, 2015. The decreases in securities during both periods were due to the sales of securities to fund loan growth.
  • Net interest and dividend income increased $275,000 to $8.2 million for the quarter ended December 31, 2015 compared to $7.9 million for the comparable 2014 period. On a sequential-quarter basis, net interest and dividend income decreased $7,000 for the quarter ended December 31, 2015, compared to the quarter ended September 30, 2015. On a sequential quarter basis, the net interest margin increased 5 basis points to 2.58%, compared to 2.53% for the quarter ended September 30, 2015.
  • Noninterest expense increased $494,000 to $7.0 million for the quarter ended December 31, 2015 compared to the fourth quarter of 2014. On a sequential-quarter basis, noninterest expense increased $123,000 from $6.9 million for the third quarter 2015. The efficiency ratio, excluding non-core items, was 74.4% for the fourth quarter of 2015, compared to 73.7% for the quarter ended September 30, 2015.

President and CEO, James C. Hagan stated, "The financial results for 2015 demonstrate a number of positive trends resulting from our continued focus on executing on our strategic initiatives. With strong annual loan and deposit growth of 12.9% and 7.9%, respectively, we continue to grow our core customer franchise and our shareholder value. As we grow, we remain just as committed to our strong credit culture, as evidenced by our consistently low levels of nonperforming assets and charge-offs. At the same time, we have actively worked to restructure our balance sheet, reducing securities 14.3% for the year 2015. This strategy has resulted in positive trends in net interest income for the full year 2015."

Hagan continued, "We have had positive customer reception to our brand of banking in the Connecticut market. Our Enfield branch, which opened in November 2014, and Granby branch, which opened in 2013, have combined deposits of over $45.0 million. With our strategic expansion into Connecticut, our objective is to continue developing loan and deposit relationships. We have an experienced, disciplined, regional leadership team prepared to take advantage of continued opportunities for organic growth and expansion into demographically attractive markets."

Additional Income Statement Discussion

Net interest and dividend income increased $614,000 to $31.7 million for the year ended December 31, 2015, as compared to $31.1 million for the year ended December 31, 2014. The net interest margin for the year ended December 31, 2015 decreased 7 basis points to 2.53%, as compared to 2.60% for the same period in 2014. This was a result of a decrease of 3 basis points in the yield on average interest-earning assets along with a 4 basis point increase in the cost of average interest-bearing liabilities.

Non-interest income increased $165,000 to $1.2 million for the quarter ended December 31, 2015, compared to $1.1 million for the quarter ended December 31, 2014. For the year ended December 31, 2015, non-interest income increased $405,000 to $4.9 million, compared to $4.5 million for the same period in 2014. For the year ended December 31, 2015, non-interest income included a $130,000 one-time credit pertaining to a vendor contract renegotiation.

Non-interest expense increased $1.5 million to $27.4 million from $25.9 million for the year ended December 31, 2015, compared to the same period in 2014. Salaries and benefits increased $701,000 and occupancy expense increased $163,000. This was driven, in part, by annual increases in benefits expenses and the addition of the Enfield branch, which opened in November 2014. The efficiency ratio, excluding non-core items, was 75.5% and 73.6% for the years ended December 31, 2015 and 2014, respectively.

Additional Balance Sheet Discussion

Total deposits increased $66.2 million, or 7.9%, to $900.4 million at December 31, 2015, compared to $834.2 million at December 31, 2014. This was primarily due to increases in term accounts of $38.0 million, money market accounts of $15.3 million, checking accounts of $12.7 million and savings accounts of $254,000. The increase in term accounts from December 31, 2014 includes $17.5 million in brokered and listing service deposits, which provide a diversified, low cost funding source. Total deposits decreased $8.6 million, or 1.0%, to $900.4 million at December 31, 2015, compared to $909.0 million at September 30, 2015. In addition, short-term borrowings and long term debt decreased $44.7 million, or 13.7%, to $281.8 at December 31, 2015 from $326.5 million at December 31, 2014. On a sequential-quarter basis, short-term borrowings and long term debt decreased $5.8 million, or 2.0%, to $281.8 million at December 31, 2015, compared to $287.6 million at September 30, 2015.

Shareholders' equity was $139.5 million at December 31, 2015 and $139.6 million at September 30, 2015, which represented 10.4% and 10.3% of total assets at December 31 and September 30, 2015, respectively. The decrease in shareholders' equity during the quarter reflects the repurchase of 130,298 shares of common stock for $1.0 million (an average price of $7.84 per share), a decrease in accumulated other comprehensive income of $192,000, and the payment of a quarterly dividend of $518,000. This was offset by net income of $1.4 million for the quarter ended December 31, 2015.

On March 13, 2014, the Company announced a repurchase program under which it may repurchase up to 1,970,000 shares, or 10% of its outstanding common stock. At December 31, 2015, there were 484,668 shares remaining under this repurchase program.

Credit Quality

The allowance for loan losses was $8.8 million, $8.4 million and $7.9 million at December 31, 2015, September 30, 2015 and December 31, 2014, representing 1.08%, 1.04% and 1.10% of total loans, respectively. This represents 109.4%, 114.0% and 90.0% of nonperforming loans, respectively.

An analysis of the changes in the allowance for loan losses is as follows:

   
Three Months Ended
December 31,   September 30,   December 31,
2015 2015 2014
(In thousands)
 
Balance, beginning of period $ 8,372 $ 8,295 $ 7,695
Provision 475 150 275
Charge-offs (65 ) (85 ) (35 )
Recoveries   58     12     13  
Balance, end of period $ 8,840   $ 8,372   $ 7,948  

Provision for loan losses expense was $475,000 for the fourth quarter 2015, compared to $275,000 for the comparable 2014 period. Although still performing, two commercial loan relationships were downgraded to a higher risk profile for allowance purposes, which resulted in an increase of $230,000 in the provision during the fourth quarter 2015.

Nonperforming loans were $8.1 million and $7.3 million, representing 0.99% and 0.91% of total loans at December 31, 2015 and September 30, 2015, respectively. Loans delinquent 30 - 89 days decreased $3.0 million to $2.9 million at December 31, 2015 from $5.9 million at September 30, 2015. There are no loans 90 or more days past due and still accruing interest.

Declaration of Quarterly Dividend

The Board of Directors approved the declaration of a quarterly cash dividend of $0.03 per share. The dividend is payable on February 24, 2016 to all shareholders of record on February 10, 2016.

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 operate through 13 banking offices located in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts, and Granby and Enfield, Connecticut. To learn more, visit our website at www.westfieldbank.com.

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, 2014, 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 share and per share data)

(Unaudited)
 
    Three Months Ended   Year Ended
December 31,   September 30,   June 30,   March 31,   December 31,   December 31,
2015   2015   2015   2015   2014   2015   2014
INTEREST AND DIVIDEND INCOME:  
Loans $ 8,072 $ 7,849 $ 7,371 $ 7,229 $ 7,331 $ 30,521 $ 27,843
Securities 2,609 2,997 3,049 2,885 3,079 11,541 12,889
Other investments - at cost 133 126 69 68 59 396 246

Federal funds sold, interest-bearing depositsand other short-term investments
  6       2       5       6      

2
      18       13  
Total interest and dividend income   10,820       10,974       10,494       10,188       10,471       42,476       40,991  
 
INTEREST EXPENSE:
Deposits 1,436 1,414 1,380 1,341 1,300 5,571 5,177
Long-term debt 889 1,083 1,092 1,070 1,119 4,133 4,326
Short-term borrowings   342       317       243       187       174       1,090       420  
Total interest expense   2,667       2,814       2,715       2,598       2,593       10,794       9,923  
 
Net interest and dividend income 8,153 8,160 7,779 7,590 7,878 31,682 31,068
 
PROVISION FOR LOAN LOSSES   475       150       350       300       275       1,275       1,575  
                         

Net interest and dividend income afterprovision for loan losses
  7,678       8,010       7,429       7,290       7,603       30,407       29,493  
 
NONINTEREST INCOME:
Service charges and fees 865 789 840 638 659 3,132 2,617
Income from bank-owned life insurance 378 374 407 367 374 1,527 1,523
Loss on prepayment of borrowings - (429 ) (278 ) (593 ) - (1,300 ) -
Gain on sales of securities, net   (1 )     414       276       817       44       1,506       320  
Total noninterest income   1,242       1,148       1,245       1,229       1,077       4,865       4,460  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,822 3,903 3,863 3,821 3,643 15,410 14,709
Occupancy 795 784 818 840 821 3,239 3,076
Data processing 582 636 559 585 616 2,361 2,341
Professional fees 623 596 488 472 447 2,178 1,936
FDIC insurance 208 212 188 193 205 800 713
Other   960       736       949       800       764       3,445       3,134  
Total noninterest expense   6,990       6,867       6,865       6,711       6,496       27,433       25,909  
 
INCOME BEFORE INCOME TAXES 1,930 2,291 1,809 1,808 2,184 7,839 8,044
 
INCOME TAX PROVISION   529       680       445       470       523       2,124       1,882  
NET INCOME $ 1,401     $ 1,611     $ 1,364     $ 1,338     $ 1,661     $ 5,715     $ 6,162  
 
Basic earnings per share $ 0.08 $ 0.09 $ 0.08 $ 0.08 $ 0.09 $ 0.33 $ 0.34
Weighted average shares outstanding 17,329,248 17,461,472 17,519,562 17,684,498 17,718,143 17,497,620 18,183,739
Diluted earnings per share $ 0.08 $ 0.09 $ 0.08 $ 0.08 $ 0.09 $ 0.33 $ 0.34
Weighted average diluted shares outstanding 17,329,248 17,461,472 17,519,562 17,684,498 17,718,143 17,497,620 18,183,739
 
Other Data:
Return on average assets (1) 0.41 % 0.47 % 0.41 % 0.41 % 0.50 % 0.42 % 0.48 %
Return on average equity (1) 3.99 % 4.69 % 3.89 % 3.82 % 4.57 % 4.10 % 4.18 %
Efficiency ratio (2) 74.39 % 73.66 % 76.06 % 78.08 % 72.90 % 75.49 % 73.59 %
Net interest margin 2.58 % 2.53 % 2.50 % 2.52 % 2.56 % 2.53 % 2.60 %
(1) Annualized.

(2) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income, excludinggain and loss on sale of securities, gain on bank-owned life insurance death benefit and loss on prepayment of borrowings.
 
 

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets and Other Data

(Dollars in thousands, except per share data)

(Unaudited)
 
December 31,   September 30,   June 30,   March 31,   December 31,
2015 2015 2015 2015 2014
Cash and cash equivalents $ 13,703 $ 21,980 $ 13,694 $ 12,719 $ 18,785
Securities available for sale, at fair value 182,590 191,324 245,004 233,591 215,750
Securities held to maturity, at cost 238,219 248,757 256,303 266,718 278,080

Federal Home Loan Bank of Boston and otherrestricted stock - at cost
15,074 15,839 15,372 14,934 14,934
 
Loans 818,213 806,893 759,382 730,354 724,686
Allowance for loan losses   8,840     8,372     8,295     8,035     7,948  
Net loans 809,373 798,521 751,087 722,319 716,738
 
Bank-owned life insurance 50,230 49,852 49,477 49,070 48,703
Other assets   30,741     30,942     30,749     29,660     27,106  
TOTAL ASSETS $ 1,339,930   $ 1,357,215   $ 1,361,686   $ 1,329,011   $ 1,320,096  
 
Total deposits $ 900,363 $ 909,041 $ 897,714 $ 873,303 $ 834,218
Short-term borrowings 128,407 121,222 111,251 82,625 93,997
Long-term debt 153,358 166,407 195,772 212,637 232,479
Other liabilities   18,336     20,937     17,124     20,156     16,859  
TOTAL LIABILITIES 1,200,464 1,217,607 1,221,861 1,188,721 1,177,553
 
TOTAL SHAREHOLDERS' EQUITY   139,466     139,608     139,825     140,290     142,543  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,339,930   $ 1,357,215   $ 1,361,686   $ 1,329,011   $ 1,320,096  
 
Book value per share $ 7.63 $ 7.59 $ 7.56 $ 7.56 $ 7.61
 
Other Data:
30- 89 day delinquent loans $ 2,876 $ 5,882 $ 1,744 $ 1,973 $ 3,821
Nonperforming loans 8,080 7,347 8,013 8,340 8,830

Nonperforming loans as a percentage of totalloans
0.99 % 0.91 % 1.06 % 1.14 % 1.22 %

Nonperforming assets as a percentage of totalassets
0.60 % 0.54 % 0.59 % 0.63 % 0.67 %

Allowance for loan losses as a percentage ofnonperforming loans
109.41 % 113.95 % 103.52 % 96.34 % 90.01 %

Allowance for loan losses as a percentage of totalloans
1.08 % 1.04 % 1.09 % 1.10 % 1.10 %
 

The following tables set forth the information relating to our average balances and net interest income for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, and the years ended December 31, 2015 and 2014, 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, 2015 September 30, 2015 December 31, 2014
Average         Avg Yield/ Average         Avg Yield/ Average         Avg Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 806,519 $ 8,102 4.02 % $ 788,637 $ 7,879 4.00 % $ 721,528 $ 7,363 4.08 %
Securities(2) 429,571 2,654 2.47 481,360 3,068 2.55 494,519 3,181 2.57
Other investments - at cost 16,374 133 3.25 16,963 126 2.97 16,202 59 1.46
Short-term investments(3)   13,660   6   0.18   7,704   2   0.10   9,721   2   0.08
Total interest-earning assets 1,266,124   10,895   3.44 1,294,664   11,075   3.42 1,241,970   10,605   3.42
Total noninterest-earning assets   80,868   76,614   75,286
 
Total assets $ 1,346,992 $ 1,371,278 $ 1,317,256
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts $ 28,745 17 0.24 $ 34,725 20 0.23 $ 38,138 22 0.23
Savings accounts 75,426 20 0.11 75,943 20 0.11 75,928 20 0.11
Money market accounts 242,165 204 0.34 239,112 198 0.33 233,582 220 0.38
Time certificates of deposit   402,837   1,195   1.19   398,238   1,176   1.18   348,928   1,038   1.19
Total interest-bearing deposits 749,173 1,436 748,018 1,414 696,576 1,300
Short-term borrowings and long-term debt   285,687   1,231   1.72   320,712   1,400   1.75   324,394   1,293   1.59
Interest-bearing liabilities   1,034,860   2,667   1.03   1,068,730   2,814   1.05   1,020,970   2,593   1.02
Noninterest-bearing deposits 153,969 149,626 138,311

Other noninterest-bearing liabilities
  18,992   16,755   13,802
Total noninterest-bearing liabilities   172,961   166,381   152,113
 
Total liabilities 1,207,821 1,235,111 1,173,083
Total equity   139,171   136,167   144,173
Total liabilities and equity $ 1,346,992 $ 1,371,278 $ 1,317,256
Less: Tax-equivalent adjustment(2)   (75 )   (101 )   (134 )
Net interest and dividend income $ 8,153   $ 8,160   $ 7,878  
Net interest rate spread(4) 2.41 % 2.37 % 2.40 %
Net interest margin(5) 2.58 % 2.53 % 2.56 %

Ratio of average interest-earningassets to average interest-bearing liabilities
122.35 121.14 121.65
 
 
For the Years Ended December 31,
2015   2014
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 766,548 $ 30,646 4.00 % $ 683,064 $ 27,989 4.10 %
Securities(2) 472,616 11,832 2.50 504,532 13,299 2.64
Other investments - at cost 16,509 396 2.40 16,597 246 1.48
Short-term investments(3) 12,067 18 0.15 13,749 13 0.09
Total interest-earning assets 1,267,740 42,892 3.38 1,217,942 41,547 3.41
Total noninterest-earning assets 78,938 73,334
 
Total assets $ 1,346,678 $ 1,291,276
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking $ 34,351 79 0.23 $ 40,412 99 0.24
Savings accounts 75,691 79 0.10 79,086 80 0.10
Money market accounts 237,782 830 0.35 221,391 846 0.38
Time certificates of deposit 390,155 4,583 1.17 343,190 4,152 1.21
Total interest-bearing deposits 737,979 5,571 684,079 5,177
Short-term borrowings and long-term debt 305,646 5,223 1.71 315,089 4,746 1.51
Interest-bearing liabilities 1,043,625 10,794 1.03 999,168 9,923 0.99
Noninterest-bearing deposits 145,519 132,923
Other noninterest-bearing liabilities 18,098 11,692
Total noninterest-bearing liabilities 163,617 144,615
 
Total liabilities 1,207,242 1,143,783
Total equity 139,436 147,493
Total liabilities and equity $ 1,346,678 $ 1,291,276
Less: Tax-equivalent adjustment(2) (416) (556)
Net interest and dividend income $ 31,682 $ 31,068
Net interest rate spread(4) 2.34 % 2.42 %
Net interest margin(5) 2.53 % 2.60 %

Ratio of average interest-earningassets to average interest-bearing liabilities

121.47
121.90
 

(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-bearingliabilities.

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

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