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Press release from Business Wire

Westfield Financial, Inc. Reports Results for the Quarter and Year Ended December 31, 2010 and Declares Dividend

Wednesday, January 26, 2011

Westfield Financial, Inc. Reports Results for the Quarter and Year Ended December 31, 2010 and Declares Dividend09:21 EST Wednesday, January 26, 2011 WESTFIELD, Mass. (Business Wire) -- Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.3 million, or $0.05 per diluted share, for the quarter ended December 31, 2010, compared to net income of $1.9 million, or $0.06 per diluted share, for the same period in 2009. For the year ended December 31, 2010, net income was $3.0 million, or $0.11 per diluted share, compared to $5.5 million, or $0.18 per diluted share, for the same period in 2009. Net interest and dividend income decreased $1.5 million to $6.9 million for the three months ended December 31, 2010, compared to $8.4 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.40% for the three months ended December 31, 2010, compared to 2.99% for the same period in 2009. For the year ended December 31, 2010, net interest and dividend income decreased $3.1 million to $29.4 million, compared to $32.5 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.64% and 3.04% for the years ended December 31, 2010 and 2009, respectively. The margin decreased because the yield on interest-earning assets decreased more than the cost of interest-bearing liabilities. The decrease in interest rates during 2010 caused an increase in prepayments on loans and investments and the funds were reinvested in a lower rate environment, thus reducing yields. As rates increased late in the fourth quarter, management observed a positive trend in net interest income, particularly in December. The provision for loan losses decreased $1.2 million to $375,000 for the three months ended December 31, 2010, compared to $1.5 million for the same period in 2009. The provision for loan losses increased $5.0 million to $8.9 million for the year ended December 31, 2010, compared to $3.9 million for the same period in 2009. The increase in the provision for loan losses for the year ended December 31, 2010 was primarily due to the reserve for and subsequent charge-off of $7.2 million related to one commercial real estate loan. For the year ended December 31, 2010, noninterest expense decreased $291,000 to $24.8 million, compared to $25.0 million for the same period in 2009. The decrease in noninterest expense for the year ended December 31, 2010 was primarily the result of a decrease in FDIC insurance expense and a decrease in salaries and benefits. These were partially offset by expenses related to other real estate owned (“OREO”). FDIC insurance expense decreased $383,000 to $751,000 for the year ended December 31, 2010 from $1.1 million for the same period in 2009 due to the accrual for a special assessment of $453,000 during the 2009 period. Salaries and benefits decreased $306,000 to $14.7 million for the year ended December 31, 2010 from $15.0 million for the same period in 2009. This was primarily due to decreases in stock-related compensation and annual bonus expense in 2010. Expenses related to OREO were $374,000 for the year ended December 31, 2010 compared to $47,000 in 2009. OREO expenses were related to write-downs and maintenance of foreclosed properties. Noninterest income was $982,000 and $1.1 million for the three months ended December 31, 2010 and 2009, respectively. For the year ended December 31, 2010, noninterest income increased $4.2 million to $7.4 million, compared to $3.2 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 $4.5 million for the year ended December 31, 2010. Balance Sheet Growth Total assets were $1.2 billion at December 31, 2010, which represents an increase of $48.1 million from December 31, 2009. In August 2010, the Company 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 its 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 a net unrealized gain of $12.6 million which was recorded as other comprehensive income at the time of transfer. Securities increased $31.9 million to $656.4 million at December 31, 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 $33.2 million to $502.3 million at December 31, 2010 from $469.1 million at December 31, 2009. Residential real estate loans increased $49.7 million to $148.8 million at December 31, 2010 from $99.1 million at December 31, 2009. Commercial real estate loans decreased $7.5 million to $221.6 million at December 31, 2010 from $229.1 at December 31, 2009. Commercial and industrial loans decreased $9.7 million to $135.3 million at December 31, 2010 from $145.0 million at December 31, 2009. Total deposits increased $52.3 million to $700.3 million at December 31, 2010 from $648.0 million at December 31, 2009. Sales emphasis on relationship-based products resulted in increases in all product categories. Savings and money market accounts increased $22.7 million to $177.5 million, checking accounts increased $18.2 million to $168.7 million, and time deposits increased $11.3 million to $354.0 million. Short-term borrowings and long-term debt increased $12.8 million to $301.1 million at December 31, 2010 from $288.3 million at December 31, 2009. This was primarily due to an increase of $16.8 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 December 31, 2010 and December 31, 2009 was $221.2 million and $247.3 million, respectively, which represented 17.8% of total assets as of December 31, 2010 and 20.8% of total assets as of December 31, 2009. The decrease in shareholders' equity reflects the repurchase of 1,988,634 shares for $16.1 million related to the stock repurchase plan, dividends amounting to $14.3 million and a decrease in other comprehensive income of $3.2 million. This was partially offset by an increase of $4.6 million related to the recognition of share-based compensation and the exercise of stock options and net income of $3.0 million. 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 1,371,851 shares purchased under the second repurchase program as of December 31, 2010. Credit Quality The allowance for loan losses was $6.9 million at December 31, 2010 and $7.6 million at December 31, 2009. This represents 1.36% and 1.60% of total loans at December 31, 2010 and December 31, 2009, respectively, and 216% and 140% of nonperforming loans at December 31, 2010 and December 31, 2009, respectively. An analysis of the changes in the allowance for loan losses is as follows:     Three Months Ended December 31,       September 30,       December 31, 2010 2010 2009 (In thousands) Balance, beginning of period $ 8,168 $ 7,827 $ 7,857 Provision 375 3,928 1,540 Charge-offs (1,636) (3,604) (1,761) Recoveries 27 17 9 Balance, end of period $ 6,934 $ 8,168 $ 7,645 Nonperforming loans decreased $2.3 million to $3.2 million at December 31, 2010, compared to $5.5 million at December 31, 2009, representing 0.63% and 1.15% of total loans at December 31, 2010 and 2009, respectively. At December 31, 2010, nonperforming loans were primarily made up of three commercial relationships totaling $2.4 million. Loans delinquent 30 – 89 days increased $14.8 million to $16.8 million at December 31, 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 January 25, 2011, the Board of Directors declared a regular cash dividend of $0.06 per share payable on February 23, 2011 to all shareholders of record on February 9, 2011.” 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.                     Three Months Ended December 31,   20102009AverageBalance     Interest     Avg Yield/CostAverageBalanceInterestAvg Yield/Cost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 495,580 $ 6,241 5.04 % $ 474,042 $ 6,334 5.34 % Securities(2) 666,761 5,008 3.00 668,553 6,977 4.17 Short-term investments(3)   13,325   3   0.09   7,765   1   0.05 Total interest-earning assets 1,175,666   11,252   3.83 1,150,360   13,312   4.63 Total noninterest-earning assets   77,061   71,905   Total assets $ 1,252,727 $ 1,222,265   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 84,020 242 1.15 $ 73,465 271 1.48 Savings accounts 97,957 152 0.62 112,445 273 0.97 Money market accounts 78,934 128 0.65 50,800 98 0.77 Time certificates of deposit   356,203   1,837   2.06   343,606   2,266   2.64 Total interest-bearing deposits 617,114 2,359 580,316 2,908 Short-term borrowings and long-term debt   306,532   1,769   2.31   282,607   1,805   2.55 Interest-bearing liabilities   923,646   4,128   1.79   862,923   4,713   2.18 Noninterest-bearing deposits 85,661 81,778 Other noninterest-bearing liabilities   13,116   25,874 Total noninterest-bearing liabilities   98,777   107,652   Total liabilities 1,022,423 970,575 Total equity   230,304   251,690 Total liabilities and equity $ 1,252,727 $ 1,222,265 Less: Tax-equivalent adjustment(2)   (206 )   (157 ) Net interest and dividend income $ 6,918   $ 8,442   Net interest rate spread(4) 2.04 % 2.45 % Net interest margin(5) 2.40 % 2.99 % Ratio of average interest-earning assets to  average interest-bearing liabilities 127.3 133.3                     For the Years Ended December 31,20102009AverageBalance     Interest     Avg Yield/CostAverageBalanceInterestAvg Yield/Cost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 482,215 $ 24,887 5.16 % $ 476,214 $ 25,834 5.42 % Securities(2) 647,462 22,079 3.41 597,811 27,286 4.56 Short-term investments(3)   13,948   8   0.06   15,051   11   0.07 Total interest-earning assets 1,143,625   46,974   4.11 1,089,076   53,131   4.88 Total noninterest-earning assets   78,811   72,267   Total assets $ 1,222,436 $ 1,161,343   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 76,954 933 1.21 $ 68,967 1,238 1.80 Savings accounts 112,546 824 0.73 89,185 955 1.07 Money market accounts 56,082 358 0.64 53,100 467 0.88 Time certificates of deposit   347,590   7,735   2.23   337,692   10,034   2.97 Total interest-bearing deposits 593,172 9,850 548,944 12,694 Short-term borrowings and long-term debt   296,752   6,915   2.33   260,083   7,328   2.82 Interest-bearing liabilities   889,924   16,765   1.88   809,027   20,022   2.47 Noninterest-bearing deposits 83,077 80,186 Other noninterest-bearing liabilities   9,513   14,789 Total noninterest-bearing liabilities   92,590   94,975   Total liabilities 982,514 904,002 Total equity   239,922   257,341 Total liabilities and equity $ 1,222,436 $ 1,161,343 Less: Tax-equivalent adjustment(2)   (827 )   (601 ) Net interest and dividend income $ 29,382   $ 32,508   Net interest rate spread(4) 2.23 % 2.41 % Net interest margin(5) 2.64 % 3.04 % Ratio of average interest-earning assets to average interest-bearing liabilities 128.5 134.6 (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. AND SUBSIDIARIESConsolidated Statements of Operations and Other Data(Dollars in thousands, except per share data)(Unaudited)     Three Months EndedYear EndedDecember 31,December 31,   2010     2009     2010     2009     INTEREST AND DIVIDEND INCOME: Loans $ 6,200 $ 6,305 $ 24,732 $ 25,725 Securities 4,843 6,849 21,407 26,794 Federal funds sold, interest-bearing deposits and other short-term investments   3     1     8     11   Total interest and dividend income   11,046     13,155     46,147     52,530     INTEREST EXPENSE: Deposits 2,359 2,908 9,850 12,694 Long-term debt 1,593 1,733 6,538 6,984 Short-term borrowings   176     72     377     344   Total interest expense   4,128     4,713     16,765     20,022     Net interest and dividend income 6,918 8,442 29,382 32,508   PROVISION FOR LOAN LOSSES   375     1,540     8,923     3,900     Net interest and dividend income after provision for loan losses   6,543     6,902     20,459     28,608     NONINTEREST INCOME: Total other-than-temporary impairment losses on securities (490 ) (411 ) (590 ) (1,754 ) Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss   443     319     443     1,476   Net other-than-temporary impairment losses recognized in income (47 ) (92 ) (147 ) (278 ) Service charges and fees 500 592 1,940 2,616 Income from bank-owned life insurance 383 392 1,524 1,523 Loss on prepayment of borrowings - - - (142 ) Gain (loss) on sales of securities, net 146 182 4,072 (383 ) Loss on disposal of premises and equipment, net - - - (8 ) Gain (loss) on sale of other real estate owned   -     -     1     (110 ) Total noninterest income   982     1,074     7,390     3,218     NONINTEREST EXPENSE: Salaries and employees benefits 3,783 3,172 14,712 15,018 Occupancy 667 635 2,620 2,583 Data processing 497 461 1,940 1,760 Professional fees 413 495 1,671 1,705 FDIC insurance 197 185 751 1,134 OREO expense 48 (2 ) 374 47 Other   684     629     2,741     2,853   Total noninterest expense   6,289     5,575     24,809     25,100     INCOME BEFORE INCOME TAXES 1,236 2,401 3,040 6,726   INCOME TAX (BENEFIT) PROVISION   (103 )   462     34     1,267   NET INCOME $ 1,339   $ 1,939   $ 3,006   $ 5,459     Basic earnings per share $ 0.05 $ 0.07 $ 0.11 $ 0.19   Weighted average shares outstanding 26,807,171 28,660,094 27,595,014 29,308,996   Diluted earnings per share $ 0.05 $ 0.06 $ 0.11 $ 0.18   Weighted average diluted shares outstanding 26,935,101 28,927,318 27,793,409 29,577,622   Other Data:   Return on average assets (1) 0.42 % 0.63 % 0.25 % 0.47 %   Return on average equity (1) 2.31 % 3.06 % 1.25 % 2.12 % _______________   (1) Three month results have been annualized.               WESTFIELD FINANCIAL, INC. AND SUBSIDIARIESConsolidated Balance Sheets and Other Data(Dollars in thousands, except per share data)(Unaudited)     December 31,December 31,20102009 Cash and cash equivalents $ 11,611 $ 28,719 Securities held to maturity, at cost - 295,011 Securities available for sale, at fair value 644,139 319,121 Federal Home Loan Bank of Boston and other restricted stock - at cost 12,251 10,339   Loans 509,326 476,794 Allowance for loan losses 6,934 7,645 Net loans 502,392 469,149   Bank-owned life insurance 40,494 38,970 Other real estate owned 223 1,662 Other assets 28,379 28,439   TOTAL ASSETS $ 1,239,489 $ 1,191,410   Total deposits $ 700,335 $ 647,975 Short-term borrowings 62,937 74,499 Long-term debt 238,151 213,845 Securities pending settlement 7,791 - Other liabilities 9,030 7,792   TOTAL LIABILITIES 1,018,244 944,111   TOTAL SHAREHOLDERS' EQUITY 221,245 247,299   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,239,489 $ 1,191,410   Book value per share $ 7.85 $ 8.29   Other Data:   30- 89 day delinquent loans $ 16,785 $ 2,002   Nonperforming loans 3,204 5,470   Nonperforming loans as a percentage of total loans 0.63% 1.15%   Nonperforming assets as a percentage of total assets 0.28% 0.60%   Allowance for loan losses as a percentage of nonperforming loans 216.42% 139.76%   Allowance for loan losses as a percentage of total loans 1.36% 1.60% Westfield Financial, Inc.James C. Hagan, 413-568-1911President & CEOorLeo R. Sagan, Jr., 413-568-1911CFO