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Press release from Business Wire

Westfield Financial, Inc. Reports Results for the Quarter Ended March 31, 2013, Declares Regular and Special Dividends and Announces 5% Repurchase Program

Wednesday, May 01, 2013

Westfield Financial, Inc. Reports Results for the Quarter Ended March 31, 2013, Declares Regular and Special Dividends and Announces 5% Repurchase Program

17:15 EDT Wednesday, May 01, 2013

WESTFIELD, Mass. (Business Wire) -- Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.8 million, or $0.08 per diluted share, for the quarter ended March 31, 2013, compared to $1.6 million, or $0.07 per diluted share, for the quarter ended December 31, 2012, and $2.3 million, or $0.09 per diluted share, for the quarter ended March 31, 2012.

Selected financial highlights for the first quarter 2013 include:

  • The net interest margin increased 12 bp to 2.59% for the quarter ended March 31, 2013, compared to 2.47% for the quarter ended December 31, 2012. Net interest and dividend income increased $76,000 to $7.7 million for the quarter ended March 31, 2013, compared to $7.6 million for the quarter ended December 31, 2012. The decrease in the cost of average interest-bearing liabilities was greater than the decrease in the yield on average interest-earning assets, primarily due to the prepayment of repurchase agreements in the first quarter 2013 and also late in the fourth quarter 2012.
  • The Bank prepaid repurchase agreements in the amount of $9.0 million and incurred a prepayment expense of $1.4 million for the first quarter 2013. The repurchase agreements had a weighted average cost of 3.77%. The Bank previously announced that during the last week of December 2012, it prepaid repurchase agreements in the amount $28.0 million which had a weighted average cost of 3.06%. This resulted in a prepayment expense of $1.0 million incurred in the quarter ended December 31, 2012. The prepayments of repurchase agreements resulted in a decrease to the cost of funds and an increase to the net interest margin.
  • During the first quarter 2013, total loans increased $1.4 million to $596.3 million. This was primarily due to an increase in residential loans of $4.2 million to $223.9 million and an increase in commercial and industrial loans of $181,000 to $126.2 million. Commercial real estate loans decreased $2.3 million to $243.5 million at March 31, 2013.
  • The Company repurchased 941,080 shares of its common stock pursuant to its stock repurchase program for a total of $7.1 million, which equates to 4.1% of the outstanding shares as of December 31, 2012. The shares were repurchased at an average price of $7.52.
  • The credit for loan losses was $235,000 for the first quarter 2013 as a result of continued improvement in the overall risk profile of the commercial loan portfolio. Classified loans that previously carried higher allowances showed considerable improvement, resulting in a lower allowance.

Income Statement Discussion and Analysis

Net interest and dividend income increased $76,000 to $7.7 million for the quarter ended March 31, 2013, compared to $7.6 million for the quarter ended December 31, 2012. The net interest margin increased 12 bp to 2.59% for the quarter ended March 31, 2013, compared to 2.47% for the quarter ended December 31, 2012. The cost of average interest-bearing liabilities decreased 14 basis points, which was partially offset by a decrease of 2 basis points in the yield on average interest-earning assets. The decrease in the cost of funds was primarily due to the prepayment of repurchase agreements in the first quarter 2013 and also late in the fourth quarter 2012.

Net interest and dividend income increased $253,000 to $7.7 million for the three months ended March 31, 2013, as compared to $7.4 million for the same period in 2012. The increase in income was primarily due to a 32 bp decrease in the cost of average interest-bearing liabilities and an increase of $21.6 million in average interest-earning assets, partially offset by a 20 bp decrease in the yield on average interest-earning assets.

Noninterest income decreased $402,000 for the first quarter 2013 compared to the fourth quarter 2012. The fourth quarter 2012 included fee income of $156,000 from a specific commercial loan transaction. In addition, fee income from the third-party mortgage company decreased $131,000 because of management's decision to retain more residential loans on the balance sheet rather than refer them to the third-party mortgage company.

Net gains on sales of securities were $1.4 million for the first quarter 2013. 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 $9.0 million and incurred a prepayment expense of $1.4 million.

Noninterest income decreased $1.6 million for the quarter ended March 31, 2013, compared to the same period in 2012. The 2013 period included a loss of $1.4 million on prepayment of repurchase agreements compared to none in the 2012 period. In addition, net gains on sales of securities were $1.4 million for the quarter ended March 31, 2013, compared to $1.6 million for the same period in 2012.

Noninterest expense decreased $237,000 to $6.5 million for the first quarter 2013, compared to $6.7 million for the fourth quarter 2012. Salaries and benefits decreased $130,000 to $3.8 million in the first quarter 2013 primarily due to the completion of vesting of certain stock-based compensation during the fourth quarter 2012. The fourth quarter 2012 also included $189,000 in other real estate owned (“OREO”) expense primarily due to the write down of an OREO property.

Noninterest expense decreased $335,000 for the quarter ended March 31, 2013, compared to the same period in 2012. This was primarily the result of a decrease in salaries and benefits of $469,000 primarily due to the completion of vesting of certain stock-based compensation in the fourth quarter 2012.

Balance Sheet Growth

Total assets were stable at $1.3 billion at March 31, 2013 and December 31, 2012. Securities decreased $4.4 million to $631.4 million at March 31, 2013, compared to $635.8 million at December 31, 2012.

During the first quarter 2013, total loans increased $1.4 million to $596.3 million. This was primarily due to an increase in residential loans of $4.2 million to $223.9 million and an increase in commercial and industrial loans of $181,000 to $126.2 million. Commercial real estate loans decreased $2.3 million to $243.5 million at March 31, 2013.

Total deposits increased $18.8 million to $772.2 million at March 31, 2013, compared to $753.4 million at December 31, 2012, primarily due to an increase in money market accounts of $19.2 million.

Shareholders' equity was $179.0 million and $189.2 million, which represented 13.7% and 14.5% of total assets at March 31, 2013, and December 31, 2012, respectively. The decrease in shareholders' equity during the quarter reflects the repurchase of 941,080 shares of our common stock at a cost of $7.1 million pursuant to the Company's stock repurchase program, the payment of regular dividends amounting to $1.3 million and a decrease in other comprehensive income of $3.8 million due to the change in fair value of securities. This was partially offset by net income of $1.8 million for the quarter ended March 31, 2013.

On December 7, 2012, the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 2,427,000 shares, or 10% of its outstanding common stock. There were 65,582 shares remaining to be purchased under the repurchase program as of March 31, 2013. These shares were repurchased in April 2013, thus completing the program.

Credit Quality

The allowance for loan losses was $7.6 million at March 31, 2013, and $7.8 million at December 31, 2012, representing 1.27% and 1.31% of total loans, respectively. This represents 255.8% and 259.0% of nonperforming loans at March 31, 2013, and December 31, 2012, respectively.

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

        Three Months Ended
March 31,   December 31,   March 31,
2013 2012 2012
(In thousands)
 
Balance, beginning of period $ 7,794 $ 8,176 $ 7,764
Provision (credit) (235 ) - 220
Charge-offs (154 ) (399 ) (199 )
Recoveries   160     17     18  
Balance, end of period $ 7,565   $ 7,794   $ 7,803  

During the first quarter 2013, nonperforming loans decreased $52,000 to $3.0 million, representing 0.50% of total loans at March 31, 2013. Loans delinquent 30 – 89 days were $1.9 million at March 31, 2013, and $1.2 million December 31, 2012. There are no loans 90 or more days past due and still accruing interest.

Declaration of Regular and Special Dividends

James C. Hagan, Chief Executive Officer stated, “The Board of Directors approved the declaration of a regular cash dividend of $0.06 per share and a special cash dividend of $0.05 per share. Both dividends are payable on May 29, 2013, to all shareholders of record on May 15, 2013.”

Announcement of 5% Stock Repurchase Program

Mr. Hagan also announced that the Company's Board of Directors has authorized a stock repurchase program under which the Company may repurchase up to 1,092,000 shares, or 5% of its outstanding common stock as of April 30, 2013. The Company completed its previous stock repurchase program on April 5, 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 11 banking offices in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts. The Bank also recently announced plans to open a full service banking center with branch services, a 24 hour deposit imaging ATM, and a residential and commercial lender at the Granby Village Shops in Granby, Connecticut. This will be our first location outside of western 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, 2012, 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
March 31,   December 31,   March 31,
2013 2012 2012
INTEREST AND DIVIDEND INCOME:
Loans $ 6,271 $ 6,369 $ 6,381
Securities 4,057 4,228 4,312
Other investments - at cost 19 23 22
Federal funds sold, interest-bearing deposits and other short-term investments   2     6     -  
Total interest and dividend income   10,349     10,626     10,715  
 
INTEREST EXPENSE:
Deposits 1,387 1,478 1,637
Long-term debt 1,258 1,534 1,631
Short-term borrowings   34     20     30  
Total interest expense   2,679     3,032     3,298  
 
Net interest and dividend income 7,670 7,594 7,417
 
(CREDIT) PROVISION FOR LOAN LOSSES   (235 )   -     220  
 
Net interest and dividend income after (credit) provision for loan losses   7,905     7,594     7,197  
 
NONINTEREST INCOME:
Service charges and fees 572 933 509
Income from bank-owned life insurance 385 387 384
Gain on bank-owned life insurance death benefit - - 75
Loss on prepayment of borrowings (1,426 ) (1,017 ) -
Gain on sales of securities, net   1,427     1,051     1,585  
Total noninterest income   958     1,354     2,553  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,808 3,938 4,277
Occupancy 705 703 705
Data processing 526 511 527
Professional fees 510 470 437
OREO expense 22 189 17
FDIC insurance 161 161 143
Other   783     774     738  
Total noninterest expense   6,515     6,746     6,844  
 
INCOME BEFORE INCOME TAXES 2,348 2,202 2,906
 
INCOME TAX PROVISION   566     648     567  
NET INCOME $ 1,782   $ 1,554   $ 2,339  
 
Basic earnings per share $ 0.08 $ 0.07 $ 0.09
Weighted average shares outstanding 21,102,021 23,041,733 25,449,759
Diluted earnings per share $ 0.08 $ 0.07 $ 0.09
Weighted average diluted shares outstanding 21,102,075 23,041,733 25,502,311
Other Data:
Return on average assets (1) 0.56 % 0.47 % 0.74 %
Return on average equity (1) 3.97 % 3.09 % 4.30 %
 

(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)

           
March 31, December 31, March 31,
2013 2012 2012
Cash and cash equivalents $ 19,183 $ 11,761 $ 17,204
Securities available for sale, at fair value 616,155 621,507 645,913
Federal Home Loan Bank of Boston and other restricted stock - at cost 15,242 14,269 12,243
 
Loans 596,264 594,918 558,373
Allowance for loan losses   7,565     7,794     7,803  
Net loans 588,699 587,124 550,570
 
Bank-owned life insurance 46,607 46,222 44,153
Other real estate owned - 964 1,130
Other assets   20,967     19,615     22,400  
TOTAL ASSETS $ 1,306,853   $ 1,301,462   $ 1,293,613  
 
Total deposits $ 772,196 $ 753,413 $ 748,630
Short-term borrowings 55,827 69,934 70,237
Long-term debt 289,600 278,861 248,275
Other liabilities   10,250     10,067     10,960  
TOTAL LIABILITIES 1,127,873 1,112,275 1,078,102
 
TOTAL SHAREHOLDERS' EQUITY   178,980     189,187     215,511  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,306,853   $ 1,301,462   $ 1,293,613  
 
Book value per share $ 8.17 $ 8.28 $ 8.10
 
Other Data:
30- 89 day delinquent loans $ 1,919 $ 1,162 $ 4,045
Nonperforming loans 2,957 3,009 2,759
Nonperforming loans as a percentage of total loans 0.50 % 0.51 % 0.49 %
Nonperforming assets as a percentage of total assets 0.23 % 0.31 % 0.30 %
Allowance for loan losses as a percentage of nonperforming loans 255.83 % 259.02 % 282.82 %
Allowance for loan losses as a percentage of total loans 1.27 % 1.31 % 1.40 %
 
 

The following tables sets forth the information relating to our average balance at, and net interest income for, the three months ended March 31, 2013, December 31, 2012 and March 31, 2012, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

        Three Months Ended
March 31, 2013   December 31, 2012
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 590,290 $ 6,309 4.28 % $ 585,026 $ 6,408 4.38 %
Securities(2) 613,288 4,202 2.74 642,554 4,396 2.74
Other investments - at cost 16,671 19 0.46 15,929 23 0.58
Short-term investments(3)   8,016   2   0.10   13,330   6   0.18
Total interest-earning assets 1,228,265   10,532   3.43 1,256,839   10,833   3.45
Total noninterest-earning assets   65,848   62,744
 
Total assets $ 1,294,113 $ 1,319,583
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 50,195 37 0.29 $ 56,089 46 0.33
Savings accounts 91,770 37 0.16 92,432 38 0.16
Money market accounts 174,218 165 0.38 177,358 189 0.43
Time certificates of deposit   326,384   1,148   1.41   323,952   1,205   1.49
Total interest-bearing deposits 642,567 1,387 649,831 1,478
Short-term borrowings and long-term debt   346,382   1,292   1.49   345,033   1,554   1.80
Interest-bearing liabilities   988,949   2,679   1.08   994,864   3,032   1.22
Noninterest-bearing deposits 112,947 112,139
Other noninterest-bearing liabilities   10,050   12,732
Total noninterest-bearing liabilities   122,997   124,871
 
Total liabilities 1,111,946 1,119,735
Total equity   182,167   199,848
Total liabilities and equity $ 1,294,113 $ 1,319,583
Less: Tax-equivalent adjustment(2)   (183 )   (207 )
Net interest and dividend income $ 7,670   $ 7,594  
Net interest rate spread(4) 2.35 % 2.23 %
Net interest margin(5) 2.59 % 2.47 %

Average interest-earning assets to average interest-bearing liabilities

124.20 126.33

(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 March 31,
2013   2012
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 590,290 $ 6,309 4.28 % $ 555,460 $ 6,420 4.62 %
Securities(2) 613,288 4,202 2.74 622,854 4,497 2.89
Other investments - at cost 16,671 19 0.46 14,298 22 0.62
Short-term investments(3) 8,016 2 0.10 14,040 - 0.00
Total interest-earning assets 1,228,265 10,532 3.43 1,206,652 10,939 3.63
Total noninterest-earning assets 65,848 64,916
 
Total assets $ 1,294,113 $ 1,271,568
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 50,195 37 0.29 $ 68,230 102 0.60
Savings accounts 91,770 37 0.16 97,957 65 0.27
Money market accounts 174,218 165 0.38 157,086 228 0.58
Time certificates of deposit 326,384 1,148 1.41 315,493 1,242 1.57
Total interest-bearing deposits 642,567 1,387 638,766 1,637
Short-term borrowings and long-term debt 346,382 1,292 1.49 305,014 1,661 2.18
Interest-bearing liabilities 988,949 2,679 1.08 943,780 3,298 1.40
Noninterest-bearing deposits 112,947 99,491
Other noninterest-bearing liabilities 10,050 10,317
Total noninterest-bearing liabilities 122,997 109,808
 
Total liabilities 1,111,946 1,053,588
Total equity 182,167 217,980
Total liabilities and equity $ 1,294,113 $ 1,271,568
Less: Tax-equivalent adjustment(2) (183) (224)
Net interest and dividend income $ 7,670 $ 7,417
Net interest rate spread(4) 2.35 % 2.23 %
Net interest margin(5) 2.59 % 2.55 %

Average interest-earning assets to average interest-bearing liabilities

124.20 127.85

(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, President & CEO, 413-568-1911
or
Leo R. Sagan, Jr., CFO, 413-568-1911

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