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Press release from Business Wire

Westfield Financial, Inc. Reports Results for the Quarter and Nine Months Ended September 30, 2010 and Declares Regular and Special Dividends

Wednesday, October 27, 2010

Westfield Financial, Inc. Reports Results for the Quarter and Nine Months Ended September 30, 2010 and Declares Regular and Special Dividends10:35 EDT Wednesday, October 27, 2010 WESTFIELD, Mass. (Business Wire) -- Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $699,000, or $0.03 per diluted share, for the quarter ended September 30, 2010, compared to net income of $1.2 million, or $0.04 per diluted share, for the same period in 2009. For the nine months ended September 30, 2010, net income was $1.7 million or $0.06 per diluted share, compared to $3.5 million or $0.12 per diluted share for the same period in 2009. The decrease in earnings was mainly the result of a $3.3 million increase in the provision for loan losses to $3.9 million for the three months ended September 30, 2010, compared to $620,000 for the same period in 2009. The provision for loan losses increased $6.1 million to $8.5 million for the nine months ended September 30, 2010, compared to $2.4 million in the same period in 2009. The increase in the provision for loan losses for the quarter ended September 30, 2010 was primarily due to the additional reserve for and subsequent charge-off of $3.6 million related to one commercial real estate loan. For the nine months ended September 30, 2010, a total of $7.2 million was charged off for this loan. Net interest and dividend income decreased $893,000 to $7.3 million for the three months ended September 30, 2010, compared to $8.2 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.58% for the three months ended September 30, 2010, compared to 2.99% for the same period in 2009. For the nine months ended September 30, 2010, net interest and dividend income decreased $1.6 million to $22.5 million, compared to $24.1 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.72% and 3.07% for the nine months ended September 30, 2010 and 2009, respectively. The margin decreased because the yield on interest-earning assets decreased more than the cost of interest-bearing liabilities. As securities and loans paid down, the funds were reinvested in a lower rate environment, thus reducing yields. For the three months ended September 30, 2010, noninterest expense increased $110,000 to $6.2 million, compared to $6.1 million for the same period in 2009. For the nine months ended September 30, 2010, noninterest expense decreased $1.0 million to $18.5 million, compared to $19.5 million for the same period in 2009. The decrease in noninterest expense for the nine months ended September 30, 2010 was primarily the result of decreases in salaries and benefits and FDIC insurance expense. Salaries and benefits decreased $914,000 to $10.9 million for the nine months ended September 30, 2010 from $11.8 million for the same period in 2009. FDIC insurance expense decreased $395,000 to $555,000 for the nine months ended September 30, 2010 from $950,000 for the same period in 2009. The 2009 period included the accrual for a special assessment that was imposed upon all banks at September 30, 2009, which for Westfield Bank amounted to $453,000. Noninterest income increased $3.5 million to $3.4 million for the three months ended September 30, 2010, compared to a net loss of $119,000 for the same period in 2009. For the nine months ended September 30, 2010, noninterest income increased $4.3 million to $6.4 million, compared to $2.1 million for the same period in 2009. The increase was primarily the result of an increase in net gains on the sale of securities of $3.4 million and $4.5 million for the three and nine months ended September 30, 2010, respectively. Balance Sheet Growth Total assets were $1.3 billion at September 30, 2010, which represents an increase of $61.8 million from December 31, 2009. In August 2010, Westfield Financial transferred all of its held-to-maturity investments to the available-for-sale category. Management determined that it no longer had the positive intent to hold its investments in securities classified as held-to-maturity for an indefinite period of time because of management's desire to have more flexibility in managing the investment portfolio. The securities transferred had a total amortized cost of $287.1 million, fair value of $299.7 million and the net unrealized gain of $12.6 million was recorded as other comprehensive income at the time of transfer. Securities increased $61.9 million to $686.4 million at September 30, 2010 from $624.5 million at December 31, 2009. The increase in securities was the result of reinvesting funds from deposits, short-term borrowings and long-term debt as discussed below. Net loans increased by $9.3 million to $478.4 million at September 30, 2010 from $469.1 million at December 31, 2009. Residential real estate loans increased $24.1 million to $123.2 million at September 30, 2010 from $99.1 million at December 31, 2009. Commercial real estate loans decreased $10.2 million to $218.9 million at September 30, 2010 from $229.1 at December 31, 2009. Total deposits increased $45.3 million to $693.3 million at September 30, 2010 from $648.0 million at December 31, 2009. The increase in deposits was due to increases in savings accounts, checking accounts and time deposits. Regular savings accounts increased $17.1 million to $121.8 million, primarily due to an account that is part of a relationship-based product set. Checking accounts increased $16.6 million to $167.1 million and time deposits increased $16.3 million to $358.9 million. Short-term borrowings and long-term debt increased $15.9 million to $304.2 million at September 30, 2010 from $288.3 million at December 31, 2009. This was primarily due to an increase of $19.9 million in Federal Home Loan Bank borrowings. Current interest rates permit Westfield Financial to earn a more advantageous spread by borrowing funds and reinvesting in loans and securities. Shareholders' equity at September 30, 2010 and December 31, 2009 was $239.2 million and $247.3 million, respectively, which represented 19.1% of total assets as of September 30, 2010 and 20.8% of total assets as of December 31, 2009. The decrease in shareholders' equity reflects the repurchase of 1,813,237 shares for $14.7 million related to the stock repurchase plan, and dividends amounting to $8.7 million. This was partially offset by a $9.7 million increase in other comprehensive income, net income of $1.7 million and $3.9 million related to the recognition of share-based compensation and the exercise of stock options. During the second quarter of 2010, the Company completed the stock repurchase program approved by the Board of Directors on January 22, 2008, which authorized the Company to repurchase up to 3,194,000 shares. On May 25, 2010, the Board of Directors authorized the commencement of a second stock repurchase program, authorizing the repurchase up to 2,924,367 shares, or ten percent of its outstanding shares of common stock. There were 1,224,389 purchased under the second repurchase program at September 30, 2010. Credit Quality The allowance for loan losses was $8.2 million at September 30, 2010, and $7.6 million at December 31, 2009. This represents 1.68% and 1.60% of total loans at September 30, 2010 and December 31, 2009, respectively, and 205% and 140% of nonperforming loans at September 30, 2010 and December 31, 2009, respectively. An analysis of the changes in the allowance for loan losses is as follows:   Three Months Ended September 30,       June 30,       September 30, 2010 2010 2009 (In thousands) Balance, beginning of period $ 7,827 $ 7,551 $ 7,337 Provision 3,928 4,120 620 Charge-offs (3,604 ) (3,861 ) (117 ) Recoveries   17     17     17     Balance, end of period $ 8,168   $ 7,827   $ 7,857   Nonperforming loans decreased $1.5 million to $4.0 million at September 30, 2010, compared to $5.5 million at December 31, 2009. This represented 0.82% of total loans at September 30, 2010 and 1.15% of total loans at December 31, 2009. At September 30, 2010, nonperforming loans were primarily made up of three commercial relationships totaling $3.0 million. Charge-offs were $3.6 million for the quarter ended September 30, 2010. This was primarily due to the charge-off of the remaining $3.6 million of a single commercial real estate loan. During the second quarter of 2010, an initial $3.6 million of the loan balance was charged-off. A total of $7.2 million was charged off for this loan during 2010. The loan, a leasehold mortgage, was related to a retail building which lost its tenant, a national chain store, due to bankruptcy. The Company has minimal exposure to commercial real estate loans which involve similar leasehold mortgages. The Company is currently in the process of initiating a recovery action against the borrower. Loans delinquent 30 – 89 days increased $15.2 million to $17.2 million at September 30, 2010 from $2.0 million at December 31, 2009. This was primarily due to a single commercial real estate relationship of $15.0 million in the hotel and lodging industry. Management has recently assessed the value of the property and found it is sufficient to cover the loan and no specific loss allocation has been recorded for this relationship. Management will continue to closely monitor this relationship. There are no loans 90 or more days past due and still accruing interest. Dividend Declaration James C. Hagan, Chief Executive Officer stated, “On October 26, 2010, the Board of Directors declared a regular cash dividend of $0.06 per share and a special cash dividend of $0.15 per share. Both dividends are payable on November 23, 2010 to all shareholders of record on November 9, 2010.” About Westfield Financial, Inc. Westfield Financial, Inc. is the holding company for Westfield Bank, which is headquartered in Westfield, Massachusetts and operates through 11 banking offices in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts. The Bank's deposits are insured by the Federal Deposit Insurance Corporation. This press release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Westfield Financial Corporation.The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.These forward- looking statements involve certain risks and uncertainties.Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the risks set forth under the caption “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and in subsequent filings with the Securities and Exchange Commission.The Company does not undertake and specifically declines 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 SUBSIDIARIESConsolidated Statements of Income and Other Data(Dollars in thousands, except per share data)(Unaudited)                     Three Months EndedNine Months EndedSeptember 30,September 30,   2010     2009     2010     2009     INTEREST AND DIVIDEND INCOME: Loans $ 6,234 $ 6,503 $ 18,532 $ 19,421 Securities 5,314 6,793 16,564 19,944 Federal funds sold, interest-bearing deposits and other short-term investments   2     2     5     11   Total interest and dividend income   11,550     13,298     35,101     39,376     INTEREST EXPENSE: Deposits 2,381 3,221 7,490 9,785 Long-term debt 1,759 1,757 4,946 5,251 Short-term borrowings   61     78     200     271   Total interest expense   4,201     5,056     12,636     15,307     Net interest and dividend income 7,349 8,242 22,465 24,069   PROVISION FOR LOAN LOSSES   3,928     620     8,548     2,360     Net interest and dividend income after provision for loan losses   3,421     7,622     13,917     21,709     NONINTEREST INCOME: Total other-than-temporary impairment losses on securities - (1,343 ) (1,071 ) (1,343 ) Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss   -     1,157     971     1,157   Net other-than-temporary impairment losses recognized in income - (186 ) (100 ) (186 ) Service charges and fees 456 580 1,440 2,023 Income from bank-owned life insurance 370 371 1,096 1,084 Loss on prepayment of borrowings - - - (142 ) Gain (loss) on sales of securities, net 2,609 (774 ) 3,926 (565 ) Loss on disposal of premises and equipment, net - - - (8 ) (Loss) gain on sale of other real estate owned   -     (110 )   1     (110 ) Total noninterest income (loss)   3,435     (119 )   6,363     2,096     NONINTEREST EXPENSE: Salaries and employees benefits 3,651 3,817 10,886 11,800 Occupancy 656 632 1,952 1,948 Data processing 461 442 1,443 1,299 Professional fees 391 290 1,258 1,210 FDIC insurance 223 102 555 950 OREO expense 62 - 326 - Other   730     781     2,056     2,274   Total noninterest expense   6,174     6,064     18,476     19,481     INCOME BEFORE INCOME TAXES 682 1,439 1,804 4,324   INCOME TAX (BENEFIT) PROVISION   (17 )   197     137     804   NET INCOME $ 699   $ 1,242   $ 1,667   $ 3,520     Basic earnings per share $ 0.03 $ 0.04 $ 0.06 $ 0.12   Weighted average shares outstanding 27,432,114 29,330,638 27,860,516 29,522,327   Diluted earnings per share $ 0.03 $ 0.04 $ 0.06 $ 0.12   Weighted average diluted shares outstanding 27,586,142 29,591,706 28,082,399 29,791,421   Other Data:   Return on average assets (1) 0.22 % 0.42 % 0.18 % 0.41 %   Return on average equity (1) 1.15 % 1.92 % 0.92 % 1.82 % _______________   (1) Three and nine month results have been annualized. WESTFIELD FINANCIAL, INC. AND SUBSIDIARIESConsolidated Balance Sheets and Other Data(Dollars in thousands, except per share data)(Unaudited)         September 30,December 31,20102009 Cash and cash equivalents $ 25,309 $ 28,719 Securities held to maturity, at cost - 295,011 Securities available for sale, at fair value 674,239 319,121 Federal Home Loan Bank of Boston and other restricted stock - at cost 12,194 10,339   Loans 486,565 476,794 Allowance for loan losses   8,168     7,645   Net loans 478,397 469,149   Bank-owned life insurance 38,976 37,880   Other real estate owned 276 1,662   Other assets   23,863     29,529     TOTAL ASSETS $ 1,253,254   $ 1,191,410     Total deposits $ 693,282 $ 647,975   Short-term borrowings 65,427 74,499 Long-term debt 238,820 213,845 Securities pending settlement 8,125 - Other liabilities   8,364     7,792     TOTAL LIABILITIES 1,014,018 944,111     TOTAL SHAREHOLDERS' EQUITY   239,236     247,299     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,253,254   $ 1,191,410     Book value per share $ 8.44 $ 8.29   Other Data:   30- 89 day delinquent loans $ 17,194 $ 2,002   Nonperforming loans 3,980 5,470   Nonperforming loans as a percentage of total loans 0.82 % 1.15 %   Nonperforming assets as a percentage of total assets 0.34 % 0.60 %   Allowance for loan losses as a percentage of nonperforming loans 205.23 % 139.76 %   Allowance for loan losses as a percentage of total loans 1.68 % 1.60 % Three Months Ended September 30,2010   2009 Average     Avg Yield/ Average     Avg Yield/ BalanceInterestCostBalanceInterestCost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 490,283 $ 6,273 5.12 % $ 480,950 $ 6,530 5.43 % Securities(2) 658,857 5,479 3.33 618,599 6,913 4.47 Short-term investments(3)   11,481   2   0.07   12,459   2   0.06 Total interest-earning assets 1,160,621   11,754   4.05 1,112,008   13,445   4.84 Total noninterest-earning assets   77,988   73,550   Total assets $ 1,238,609 $ 1,185,558   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 78,329 233 1.19 $ 80,674 392 1.94 Savings accounts 123,033 216 0.70 89,869 254 1.13 Money market accounts 47,485 51 0.43 52,194 113 0.87 Time certificates of deposit   346,304   1,881   2.17   341,443   2,462   2.88 Total interest-bearing deposits 595,151 2,381 564,180 3,221 Short-term borrowings and long-term debt   310,853   1,820   2.34   271,615   1,835   2.70 Interest-bearing liabilities   906,004   4,201   1.85   835,795   5,056   2.42 Noninterest-bearing deposits 83,714 81,421 Other noninterest-bearing liabilities   8,580   11,270 Total noninterest-bearing liabilities   92,294   92,691   Total liabilities 998,298 928,486 Total equity   240,311   257,072 Total liabilities and equity $ 1,238,609 $ 1,185,558 Less: Tax-equivalent adjustment(2)   (204 )   (147 ) Net interest and dividend income $ 7,349   $ 8,242   Net interest rate spread(4) 2.20 % 2.42 % Net interest margin(5) 2.58 % 2.99 % Ratio of average interest-earning assets to average interest-bearing liabilities 128.1 133.0   Nine Months Ended September 30,2010   2009 Average     Avg Yield/ Average     Avg Yield/ BalanceInterestCostBalanceInterestCost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 477,710 $ 18,642 5.20 % $ 476,945 $ 19,497 5.45 % Securities(2) 640,959 17,048 3.55 573,971 20,302 4.72 Short-term investments(3)   14,158   5   0.05   17,507   11   0.08 Total interest-earning assets 1,132,827   35,695   4.20 1,068,423   39,810   4.97 Total noninterest-earning assets   79,401   72,389   Total assets $ 1,212,228 $ 1,140,812   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 74,572 691 1.24 $ 67,451 967 1.91 Savings accounts 117,462 672 0.76 80,913 682 1.12 Money market accounts 48,382 230 0.63 53,876 369 0.91 Time certificates of deposit   344,687   5,897   2.28   335,699   7,767   3.08 Total interest-bearing deposits 585,103 7,490 537,939 9,785 Short-term borrowings and long-term debt   293,456   5,146   2.34   252,492   5,522   2.92 Interest-bearing liabilities   878,559   12,636   1.92   790,431   15,307   2.58 Noninterest-bearing deposits 82,207 79,650 Other noninterest-bearing liabilities   8,299   11,486 Total noninterest-bearing liabilities   90,506   91,136   Total liabilities 969,065 881,567 Total equity   243,163   259,245 Total liabilities and equity $ 1,212,228 $ 1,140,812 Less: Tax-equivalent adjustment(2)   (594 )   (434 ) Net interest and dividend income $ 22,465   $ 24,069   Net interest rate spread(4) 2.28 % 2.39 % Net interest margin(5) 2.72 % 3.07 % Ratio of average interest-earning assets to average interest-bearing liabilities 128.9 135.2     (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. Westfield Financial, Inc.James C. Hagan, 413-568-1911President & CEOorLeo R. Sagan, Jr., 413-568-1911CFO