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Press release from Business Wire

Westfield Financial, Inc. Reports Results for the Quarter Ended September 30, 2011 and Declares Regular Dividend

Wednesday, October 26, 2011

Westfield Financial, Inc. Reports Results for the Quarter Ended September 30, 2011 and Declares Regular Dividend11:03 EDT Wednesday, October 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 $1.5 million, or $0.06 per diluted share, for the quarter ended September 30, 2011, compared to $699,000 or $0.03 per diluted share, for the same period in 2010. For the nine months ended September 30, 2011, net income was $4.3 million, or $0.16 per diluted share, compared to $1.7 million, or $0.06 per diluted share, for the same period in 2010. The increase in earnings was mainly the result of a $3.9 million decrease in the provision for loan losses to $15,000 for the three months ended September 30, 2011, compared to $3.9 million for the same period in 2010. The provision for loan losses decreased $8.0 million to $529,000 for the nine months ended September 30, 2011, compared to $8.5 million in the same period in 2010. The decreases in the provision for loan losses occurred because the 2010 periods included the reserve for and subsequent charge-off of $7.2 million on a single commercial real estate loan. Net interest income increased $270,000 to $7.6 million for the three months ended September 30, 2011, compared to $7.3 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.64% for the three months ended September 30, 2011, compared to 2.58% for the same period in 2010. For the nine months ended September 30, 2011, net interest income increased $530,000 to $23.0 million, compared to $22.5 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.69% and 2.72% for the nine months ended September 30, 2011 and 2010, respectively. Net interest income was favorably impacted by an increase in loans, which generally have higher yields than investments, along with a decrease in the cost of funds due to the lower interest rate environment. Noninterest income decreased $2.5 million to $943,000 for the three months ended September 30, 2011, compared to $3.4 million for the same period in 2010. For the nine months ended September 30, 2011, noninterest income decreased $3.7 million to $2.7 million, compared to $6.4 million for the same period in 2010. The decreases were primarily the result of a decrease in net gains on the sale of securities of $2.5 million and $3.7 million for the three and nine months ended September 30, 2011 and 2010, respectively. For the three months ended September 30, 2011, noninterest expense increased $455,000 to $6.6 million, compared to $6.2 million for the same period in 2010. For the nine months ended September 30, 2011, noninterest expense increased $1.1 million to $19.6 million, compared to $18.5 million for the same period in 2010. Salaries and benefits increased $336,000 for the three months ended September 30, 2011 and $780,000 for the nine months ended September 30, 2011, compared to the same periods in 2010, primarily due to normal salary and benefits increases. Balance Sheet Growth Total assets were $1.3 billion at September 30, 2011, showing an increase of $23.3 million, compared to December 31, 2010. Securities decreased $14.4 million to $640.3 million at September 30, 2011 from $654.7 million at December 31, 2010. The decrease in securities was the result of using cash flow from securities to fund the loan portfolio as discussed below. Net loans increased by $35.1 million to $537.5 million at September 30, 2011 from $502.4 million at December 31, 2010. Residential loans increased $44.1 million to $192.9 million at September 30, 2011 from $148.8 million at December 31, 2010. Through the Company's long standing relationship with a third-party mortgage company, it originated and purchased $52.5 million in residential loans within and contiguous to its market area as a means of diversifying its loan portfolio and improving net interest income. In addition, commercial and industrial loans and commercial real estate loans decreased $8.9 million to $348.0 million at September 30, 2011 from $356.9 million at December 31, 2010. Total deposits increased $20.2 million to $720.5 million at September 30, 2011 from $700.3 million at December 31, 2010. The increase in deposits was due to an increase in checking accounts of $13.1 million to $181.9 million, and an increase in savings and money market accounts of $38.3 million to $215.8 million. The increases in checking, savings and money market accounts were primarily due to a relationship-based product set introduced in 2010 which continues to show growth in 2011. Time deposit accounts decreased $31.2 million to $322.8 million at September 30, 2011, as customers have less incentive to lock up funds in time deposits because of the low interest rate environment. Shareholders' equity was $229.8 million and $221.2 million, which represented 18.2% and 17.8% of total assets at September 30, 2011 and December 31, 2010, respectively. The increase in shareholders' equity reflects an increase in other comprehensive income of $15.2 million primarily due to the change in market value of securities, net income of $4.3 million for the nine months ended September 30, 2011, an increase of $2.2 million related to the recognition of share-based compensation and the exercise of 34,646 stock options. This was partially offset by the payment of regular and special dividends amounting to $8.8 million and the repurchase of 554,228 shares of our common stock at a cost of $4.5 million, pursuant to the Company's current stock repurchase plan. On May 25, 2010, the Board of Directors authorized the commencement the Company's current stock repurchase program, authorizing the repurchase of up to 2,924,367 shares, or ten percent of the Company's outstanding shares of common stock. There were 1,926,079 shares purchased under the second repurchase program as of September 30, 2011. Credit Quality The allowance for loan losses was $7.1 million at September 30, 2011 and $6.9 million at December 31, 2010. This represents 1.30% and 1.36% of total loans at September 30, 2011 and December 31, 2010, respectively, and 254.47% and 216.42% of nonperforming loans at September 30, 2011 and December 31, 2010, respectively. An analysis of the changes in the allowance for loan losses is as follows:   Three Months Ended September 30,   June 30,   September 30, 2011 2011 2010 (In thousands) Balance, beginning of period $ 7,073 $ 6,999 $ 7,827 Provision 15 175 3,928 Charge-offs (17 ) (256 ) (3,604 ) Recoveries   16     155     17   Balance, end of period $ 7,087   $ 7,073   $ 8,168   Nonperforming loans decreased $419,000 to $2.8 million at September 30, 2011, compared to $3.2 million at December 31, 2010, representing 0.51% and 0.63% of total loans at September 30, 2011 and December 31, 2010, respectively. At September 30, 2011, nonperforming loans were primarily made up of three commercial relationships totaling $1.9 million. There are no loans 90 or more days past due and still accruing interest. Loans delinquent 30 – 89 days decreased $9.2 million to $7.6 million at September 30, 2011 from $16.8 million at December 31, 2010. The decrease in loans delinquent is mainly the result of a single commercial real estate relationship of $15.0 million in the hotel and lodging industry that was brought within 30 days of their payment due date. The delinquent loans at September 30, 2011 are primarily comprised of two commercial relationships, one of which became delinquent as of September 30, 2011 for the first time in its history. This $3.0 million loan was brought within 30 days of their payment due date on October 3, 2011 which was the first business day of the fourth quarter. Declaration of Dividends James C. Hagan, Chief Executive Officer stated, “On October 25, 2011, 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 the regular and special dividends are payable on November 23, 2011 to all shareholders of record on November 9, 2011.” About Westfield Bank The Bank 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. Forward-Looking StatementsThe 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, 2010, and in subsequent filings with the Securities and Exchange Commission.In addition, the forward-looking statements included in this press release represent our views as of the date of this release. 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 SUBSIDIARIESConsolidated Statements of Income and Other Data(Dollars in thousands, except per share data)(Unaudited)   Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010 INTEREST AND DIVIDEND INCOME: Loans $ 6,459 $ 6,234 $ 18,936 $ 18,532 Securities 4,701 5,309 15,096 16,547 Other investments 14 5 46 17 Federal funds sold, interest-bearing deposits and other  short-term investments   -     2     1   5 Total interest and dividend income   11,174     11,550     34,079   35,101   INTEREST EXPENSE: Deposits 1,811 2,381 5,891 7,490 Long-term debt 1,716 1,759 5,071 4,946 Short-term borrowings   28     61     122   200 Total interest expense   3,555     4,201     11,084   12,636   Net interest and dividend income 7,619 7,349 22,995 22,465   PROVISION FOR LOAN LOSSES   15     3,928     529   8,548   Net interest and dividend income after provision for loan  losses   7,604     3,421     22,466   13,917   NONINTEREST INCOME: Total other-than-temporary impairment losses on securities (536 ) - (576 ) (1,071 ) Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive income   474     -     474   971 Net other-than-temporary impairment losses recognized in income (62 ) - (102 ) (100 ) Service charges and fees 501 456 1,465 1,440 Income from bank-owned life insurance 398 380 1,150 1,140 Gain on sales of securities, net 131 2,609 208 3,926 (Loss) gain on sale of other real estate owned   (25 )   -     (25 ) 1 Total noninterest income   943     3,445     2,696   6,407   NONINTEREST EXPENSE: Salaries and employees benefits 3,997 3,661 11,710 10,930 Occupancy 691 656 2,027 1,952 Data processing 473 461 1,437 1,443 Professional fees 524 391 1,525 1,258 FDIC insurance 207 223 555 555 OREO expense 31 62 52 326 Other   716     730     2,307   2,056 Total noninterest expense   6,639     6,184     19,613   18,520   INCOME BEFORE INCOME TAXES 1,908 682 5,549 1,804   INCOME TAX PROVISION (BENEFIT)   414     (17 )   1,204   137 NET INCOME $ 1,494   $ 699   $ 4,345   $ 1,667   Basic earnings per share $ 0.06 $ 0.03 $ 0.16 $ 0.06   Weighted average shares outstanding 26,443,449 27,432,114 26,608,490 27,860,516   Diluted earnings per share $ 0.06 $ 0.03 $ 0.16 $ 0.06   Weighted average diluted shares outstanding 26,544,257 27,586,142 26,723,947 28,082,399   Other Data:   Return on average assets (1) 0.48 % 0.22 % 0.47 %   0.18 %   Return on average equity (1) 2.65 % 1.15 % 2.62 % 0.92 % _______________ (1) 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 31,20112010 Cash and cash equivalents $ 19,565 $ 11,611 Securities available for sale, at fair value 627,908 642,467 Federal Home Loan Bank of Boston and other restricted stock - at cost 12,438 12,282   Loans 544,599 509,326 Allowance for loan losses   7,087     6,934   Net loans 537,512 502,392   Bank-owned life insurance 43,644 40,494 Other real estate owned 1,130 223 Other assets   20,604     30,020     TOTAL ASSETS $ 1,262,801   $ 1,239,489     Total deposits $ 720,514 $ 700,335 Short-term borrowings 55,544 62,937 Long-term debt 247,240 238,151 Securities pending settlement - 7,791 Other liabilities   9,699     9,030     TOTAL LIABILITIES 1,032,997 1,018,244   TOTAL SHAREHOLDERS' EQUITY   229,804     221,245     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,262,801   $ 1,239,489     Book value per share $ 8.31 $ 7.85   Other Data:   30- 89 day delinquent loans $ 7,612 $ 16,785   Nonperforming loans 2,785 3,204   Nonperforming loans as a percentage of total loans 0.51 % 0.63 %   Nonperforming assets as a percentage of total assets 0.31 % 0.28 %   Allowance for loan losses as a percentage of nonperforming loans 254.47 % 216.42 %   Allowance for loan losses as a percentage of total loans 1.30 % 1.36 % The following tables set forth the information relating to our average balance at, and net interest income for, the three and nine months ended September 30, 2011 and 2010, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.   Three Months Ended September 30,2011   2010Average     Avg Yield/Average     Avg Yield/BalanceInterestCostBalanceInterestCost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 547,539 $ 6,498 4.75 % $ 490,283 $ 6,273 5.12 % Securities(2) 608,580 4,881 3.21 645,275 5,474 3.39 Other investments 14,048 14 0.40 13,551 5 0.15 Short-term investments(3)   8,080   -   0.00   11,481   2   0.07 Total interest-earning assets 1,178,247   11,393   3.87 1,160,590   11,754   4.05 Total noninterest-earning assets   69,586   78,019   Total assets $ 1,247,833 $ 1,238,609   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 86,425 172 0.80 $ 78,329 233 1.19 Savings accounts 103,297 112 0.43 123,033 216 0.70 Money market accounts 104,479 165 0.63 47,485 51 0.43 Time certificates of deposit   326,909   1,362   1.67   346,304   1,881   2.17 Total interest-bearing deposits 621,110 1,811 595,151 2,381 Short-term borrowings and long-term debt   300,448   1,744   2.32   310,853   1,820   2.34 Interest-bearing liabilities   921,558   3,555   1.54   906,004   4,201   1.85 Noninterest-bearing deposits 93,139 83,714 Other noninterest-bearing liabilities   9,179   8,580 Total noninterest-bearing liabilities   102,318   92,294   Total liabilities 1,023,876 998,298 Total equity   223,957   240,311 Total liabilities and equity $ 1,247,833 $ 1,238,609 Less: Tax-equivalent adjustment(2)   (219 )   (204 ) Net interest and dividend income $ 7,619   $ 7,349   Net interest rate spread(4) 2.33 % 2.20 % Net interest margin(5) 2.64 % 2.58 % Average interest-earning   assets to average interest-bearing liabilities 127.9 % 128.1 %   Nine Months Ended September 30,2011   2010Average     Avg Yield/Average     Avg Yield/BalanceInterestCostBalanceInterestCost (Dollars in thousands) ASSETS:Interest-earning assets Loans(1)(2) $ 533,222 $ 19,057 4.77 % $ 477,710 $ 18,642 5.20 % Securities(2) 620,136 15,632 3.36 628,307 17,031 3.61 Other investments 14,004 46 0.44 12,621 17 0.18 Short-term investments(3)   6,918   1   0.02   14,158   5   0.05 Total interest-earning assets 1,174,280   34,736   3.94 1,132,796   35,695   4.20 Total noninterest-earning assets   71,294   79,432   Total assets $ 1,245,574 $ 1,212,228   LIABILITIES AND EQUITY:Interest-bearing liabilities NOW accounts $ 87,864 630 0.96 $ 74,572 691 1.24 Savings accounts 105,563 427 0.54 117,462 672 0.76 Money market accounts 89,621 430 0.64 48,382 230 0.63 Time certificates of deposit   336,689   4,404   1.74   344,687   5,897   2.28 Total interest-bearing deposits 619,737 5,891 585,103 7,490 Short-term borrowings and long-term debt   306,619   5,193   2.26   293,456   5,146   2.34 Interest-bearing liabilities   926,356   11,084   1.60   878,559   12,636   1.92 Noninterest-bearing deposits 88,408 82,207 Other noninterest-bearing liabilities   9,494   8,299 Total noninterest-bearing liabilities   97,902   90,506   Total liabilities 1,024,258 969,065 Total equity   221,316   243,163 Total liabilities and equity $ 1,245,574 $ 1,212,228 Less: Tax-equivalent adjustment(2)   (657 )   (594 ) Net interest and dividend income $ 22,995   $ 22,465   Net interest rate spread(4) 2.35 % 2.28 % Net interest margin(5) 2.69 % 2.72 % Average interest-earning   assets to average interest-bearing liabilities 126.8 % 128.9 % (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 operations. (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