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Press release from Business Wire

Westfield Financial, Inc. Reports Results for the Quarter Ended June 30, 2013 and Declares Quarterly Dividend

Wednesday, July 24, 2013

Westfield Financial, Inc. Reports Results for the Quarter Ended June 30, 2013 and Declares Quarterly Dividend

09:51 EDT Wednesday, July 24, 2013

WESTFIELD, Mass. (Business Wire) -- Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.6 million, or $0.08 per diluted share, for the quarter ended June 30, 2013, compared to $974,000, or $0.04 per diluted share, for the quarter ended June 30, 2012.

For the six months ended June 30, 2013, net income was $3.4 million, or $0.16 per diluted share, compared to $3.3 million, or $0.13 per diluted share, for the same period in 2012.

Selected financial highlights for the second quarter and year-to-date 2013 include:

  • Total loans increased $10.3 million to $606.6 million for the second quarter 2013. This was primarily due to an increase in residential loans of $8.0 million, an increase in commercial and industrial loans of $2.3 million, and an increase in commercial real estate loans of $267,000.
  • The net interest margin for year-to-date June 30, 2013 of 2.57% was equal to the first six months of 2012. For the quarter ended June 30, 2013, the net interest margin decreased 4 bp to 2.55% as compared to 2.59% for the quarter ended March 31, 2013.
  • Net interest and dividend income showed a slight increase of $163,000 for the year-to-date June 30, 2013 and a slight decrease of $33,000 to $7.6 million for the quarter ended June 30, 2013, both relative to comparable periods in 2012.
  • The Company repurchased 1,157,582 shares of its common stock, which equates to 5.3% of the outstanding shares as of March 31, 2013, pursuant to its stock repurchase program for a total of $8.8 million. The shares were repurchased at an average price of $7.64 per share.
  • A portion of the investment securities portfolio was reclassified from available-for-sale to held-to-maturity. At June 30, 2013 securities classified as held-to-maturity totaled $174.0 million or 29.4% of debt securities and mortgage-backed securities.
  • The Bank prepaid repurchase agreements in the amount of $19.8 million and incurred a prepayment expense of $1.4 million for the second quarter 2013. The repurchase agreements had a weighted average cost of 2.78%. The prepayments of repurchase agreements resulted in a decrease in the cost of funds.

Income Statement Discussion and Analysis

Net interest and dividend income decreased $33,000 to $7.6 million for the quarter ended June 30, 2013, compared to $7.7 million for the quarter ended March 31, 2013. The net interest margin decreased 4 bp to 2.55% for the quarter ended June 30, 2013, compared to 2.59% for the quarter ended March 31, 2013. The yield on average interest-earning assets decreased 4 basis points, which was partially offset by a decrease of 3 basis points in the cost of average interest-bearing liabilities.

Net interest and dividend income increased $163,000 to $15.3 million for the six months ended June 30, 2013, as compared to $15.1 million for the same period in 2012. The increase in income was primarily due to a 28 bp decrease in the cost of average interest-bearing liabilities and an increase of $5.9 million in average interest-earning assets, partially offset by a 20 bp decrease in the yield on average interest-earning assets.

Net gains on sales of securities were $823,000 for the second quarter 2013, compared to $1.4 million for the quarter ended March 31, 2013. The sales primarily represented sales of mortgage-backed securities that were expected to prepay rapidly and decrease the expected yield. Income resulting from a gain on death benefit from bank-owned life insurance (“BOLI”) was $563,000. The Bank also incurred prepayment expense of $1.4 million for the second quarter 2013.

Noninterest income decreased $1.6 million for the six months ended June 30, 2013, compared to the same period in 2012. The 2013 period included a loss of $2.8 million on prepayment of repurchase agreements compared to none in the 2012 period. In addition, net gains on sales of securities were $2.3 million for the six months ended June 30, 2013, compared to $1.7 million for the same period in 2012.

Noninterest expense increased $274,000 to $6.8 million for the second quarter 2013, compared to $6.5 million for the first quarter 2013. Other expenses increased $167,000 primarily due to increases in advertising and marketing expense of $104,000 and charitable contributions of $93,000, primarily due to the timing of when the expenses are incurred.

Noninterest expense decreased $44,000 for the quarter ended June 30, 2013, compared to the same period in 2012. This was primarily the result of a decrease in salaries and benefits of $310,000 primarily due to the completion of vesting of certain stock-based compensation in the fourth quarter 2012.

Noninterest expense decreased $374,000 to $13.3 million for the six months ended June 30, 2013, compared to $13.7 million for the same period in 2012. Salaries and benefits decreased $779,000 to $7.6 million for the six months ended June 30, 2013, primarily due to the completion of vesting of certain stock-based compensation in the fourth quarter 2012. This was partially offset by an increase in other expenses of $199,000, driven by an increase of $145,000 in net ATM/Debit card expense resulting from changes in interchange fees and an increase of $71,000 in charitable contributions due to timing of when the expenses are incurred.

Income taxes were $297,000 for the second quarter 2013 and $566,000 for the first quarter 2013. This represents 15.8% and 24.1% of income before taxes, respectively. The decrease for the quarter ended June 30, 2013 was primarily due to the non-taxable BOLI death benefit.

Balance Sheet Growth

Total assets were stable at $1.3 billion at June 30, 2013 and March 31, 2013. Securities decreased $24.7 million to $606.7 million at June 30, 2013, compared to $631.4 million at March 31, 2013. Cash flow from the securities portfolio was used for loan originations and share repurchases.

During the second quarter 2013, total loans increased $10.3 million to $606.6 million. This was primarily due to an increase in residential loans of $8.0 million to $231.9 million and an increase in commercial and industrial loans of $2.3 million to $128.5 million. In addition, commercial real estate loans increased $267,000 to $243.7 million at June 30, 2013.

Total deposits increased $10.5 million to $782.7 million at June 30, 2013, compared to $772.2 million at March 31, 2013. This was primarily due to increases in money market accounts of $16.3 million and noninterest-bearing checking accounts of $5.2 million. This was partially offset by decreases in term accounts of $5.8 million and regular savings accounts of $5.0 million.

Shareholders' equity was $160.4 million and $179.0 million, which represented 12.4% and 13.7% of total assets at June 30, 2013, and March 31, 2013, respectively. The decrease in shareholders' equity during the quarter reflects the repurchase of 1,157,582 shares of our common stock at a cost of $8.8 million pursuant to the Company's stock repurchase program, a decrease in other comprehensive income of $9.2 million due to the change in fair value of securities and the payment of regular and special dividends amounting to $2.3 million. This was partially offset by net income of $1.6 million for the quarter ended June 30, 2013.

On May 1, 2013 the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 1,092,000 shares, or 5% of its outstanding common stock. This repurchase program was completed as of June 30, 2013.

Credit Quality

The allowance for loan losses was $7.5 million at June 30, 2013, and $7.6 million at March 31, 2013, representing 1.23% and 1.27% of total loans, respectively. This represents 228.4% and 255.8% of nonperforming loans at June 30, 2013, and March 31, 2013, respectively.

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

        Three Months Ended
June 30,     March 31,     June 30,
  2013     2013     2012  
(In thousands)
 
Balance, beginning of period $ 7,565 $ 7,794 $ 7,803
(Credit) provision (70 ) (235 ) 260
Charge-offs (66 ) (154 ) (47 )
Recoveries   44     160     49  
Balance, end of period $ 7,473   $ 7,565   $ 8,065  

During the second quarter 2013, nonperforming loans increased $315,000 to $3.3 million, representing 0.54% of total loans at June 30, 2013. Loans delinquent 30 – 89 days were $1.4 million at June 30, 2013, and $1.9 million March 31, 2013. There are no loans 90 or more days past due and still accruing interest.

Declaration of Quarterly Dividend

James C. Hagan, Chief Executive Officer stated, “The Board of Directors approved the declaration of a quarterly cash dividend of $0.06 per share. The dividend is payable on August 22, 2013, to all shareholders of record on August 8, 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 opened a full service banking center on June 3, 2013 with branch services, a 24 hour deposit imaging ATM, and a residential and commercial lender at the Granby Village Shops in Granby, Connecticut. This is 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 share and per share data)
(Unaudited)
        Three Months Ended       Six Months Ended
June 30,     March 31,     June 30, June 30,
2013 2013 2012 2013     2012
INTEREST AND DIVIDEND INCOME:
Loans $ 6,307 $ 6,271 $ 6,377 $ 12,578 $ 12,757
Securities 3,917 4,057 4,507 7,974 8,819
Other investments - at cost 21 19 25 40 47
Federal funds sold, interest-bearing deposits and other short-term investments   1     2     1     3     1  
Total interest and dividend income   10,246     10,349     10,910     20,595     21,624  
 
INTEREST EXPENSE:
Deposits 1,390 1,387 1,523 2,777 3,159
Long-term debt 1,188 1,258 1,623 2,446 3,254
Short-term borrowings   31     34     37     65     67  
Total interest expense   2,609     2,679     3,183     5,288     6,480  
 
Net interest and dividend income 7,637 7,670 7,727 15,307 15,144
 
(CREDIT) PROVISION FOR LOAN LOSSES   (70 )   (235 )   260     (305 )   480  
 
Net interest and dividend income after provision for loan losses   7,707     7,905     7,467     15,612     14,664  
 
NONINTEREST INCOME:
Service charges and fees 594 572 521 1,164 1,032
Income from bank-owned life insurance 387 385 278 773 661
Gain on bank-owned life insurance death benefit 563 - 5 563 80
Loss on prepayment of borrowings (1,404 ) (1,426 ) - (2,830 ) -
Gain on sales of securities, net   823     1,427     97     2,250     1,681  
Total noninterest income   963     958     901     1,920     3,454  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,817 3,808 4,127 7,625 8,404
Occupancy 730 705 703 1,434 1,408
Data processing 602 526 523 1,152 1,050
Professional fees 527 510 532 1,037 969
OREO expense - 22 21 22 38
FDIC insurance 163 161 155 324 298
Other   950     783     772     1,709     1,510  
Total noninterest expense   6,789     6,515     6,833     13,303     13,677  
 
INCOME BEFORE INCOME TAXES 1,881 2,348 1,535 4,229 4,441
 
INCOME TAX PROVISION   297     566     561     863     1,128  
NET INCOME $ 1,584   $ 1,782   $ 974   $ 3,366   $ 3,313  
 
Basic earnings per share $ 0.08 $ 0.08 $ 0.04 $ 0.16 $ 0.13
Weighted average shares outstanding 20,276,261 21,102,021 25,141,989 20,686,860 25,295,875
Diluted earnings per share $ 0.08 $ 0.08 $ 0.04 $ 0.16 $ 0.13
Weighted average diluted shares outstanding 20,276,261 21,102,075 25,158,171 20,686,887 25,330,242
 
Other Data:
Return on average assets (1) 0.49 % 0.56 % 0.30 % 0.52 % 0.52 %
Return on average equity (1) 3.66 % 3.97 % 1.83 % 3.82 % 3.09 %
 
(1) Three and six month results have been annualized.
 
 

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
 
      June 30,     March 31,     December 31,
2013 2013 2012
Cash and cash equivalents $ 15,706 $ 19,183 $ 11,761
Securities available for sale, at fair value 417,053 616,155 621,507
Securities held to maturity, at cost 173,982 - -
Federal Home Loan Bank of Boston and other restricted stock - at cost 15,629 15,242 14,269
 
Loans 606,605 596,264 594,918
Allowance for loan losses   7,473     7,565     7,794  
Net loans 599,132 588,699 587,124
 
Bank-owned life insurance 46,403 46,607 46,222
Other real estate owned - - 964
Other assets   25,730     20,967     19,615  
TOTAL ASSETS $ 1,293,635   $ 1,306,853   $ 1,301,462  
 
Total deposits $ 782,682 $ 772,196 $ 753,413
Short-term borrowings 69,972 55,827 69,934
Long-term debt 269,991 289,600 278,861
Other liabilities   10,573     10,250     10,067  
TOTAL LIABILITIES 1,133,218 1,127,873 1,112,275
 
TOTAL SHAREHOLDERS' EQUITY   160,417     178,980     189,187  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,293,635   $ 1,306,853   $ 1,301,462  
 
Book value per share $ 7.73 $ 8.17 $ 8.28
 
Other Data:
30- 89 day delinquent loans $ 1,438 $ 1,919 $ 1,162
Nonperforming loans 3,272 2,957 3,009
Nonperforming loans as a percentage of total loans 0.54 % 0.50 % 0.51 %
Nonperforming assets as a percentage of total assets 0.25 % 0.23 % 0.31 %
Allowance for loan losses as a percentage of nonperforming loans 228.39 % 255.83 % 259.02 %
Allowance for loan losses as a percentage of total loans 1.23 % 1.27 % 1.31 %
 
 

The following tables sets forth the information relating to our average balances and net interest income for, the three and six months ended June 30, 2013 and June 30, 2012, and the three months ended March 31, 2013, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

      Three Months Ended
June 30, 2013       March 31, 2013
Average         Avg Yield/ Average         Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:

 

     
Interest-earning assets
Loans(1)(2) $ 599,149 $ 6,345 4.24 % $ 590,290 $ 6,309 4.28 %
Securities(2) 608,404 4,045 2.66 613,288 4,202 2.74
Other investments - at cost 17,276 21 0.49 16,671 19 0.46
Short-term investments(3)   3,280   1   0.12   8,016     2     0.10
Total interest-earning assets 1,228,109   10,412   3.39 1,228,265   10,532     3.43
Total noninterest-earning assets   66,393   65,848  
 
Total assets $ 1,294,502 $ 1,294,113  
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 47,533 35 0.29 $ 50,195 37 0.29
Savings accounts 89,994 35 0.16 91,770 37 0.16
Money market accounts 195,885 193 0.39 174,218 165 0.38
Time certificates of deposit   327,036   1,127   1.38   326,384     1,148     1.41
Total interest-bearing deposits 660,448 1,390 642,567 1,387
Short-term borrowings and long-term debt   334,035   1,219   1.46   346,382     1,292     1.49
Interest-bearing liabilities   994,483   2,609   1.05   988,949     2,679     1.08
Noninterest-bearing deposits 116,479 112,947
Other noninterest-bearing liabilities   9,992   10,050  
Total noninterest-bearing liabilities   126,471   122,997  
 
Total liabilities 1,120,954 1,111,946
Total equity   173,548   182,167  
Total liabilities and equity $ 1,294,502 $ 1,294,113  
Less: Tax-equivalent adjustment(2)   (166 )   (183 )  
Net interest and dividend income $ 7,637   $ 7,670    
Net interest rate spread(4) 2.34 % 2.35 %
Net interest margin(5) 2.55 % 2.59 %

Average interest-earning assets to average interest-bearing liabilities

123.49 124.20
 
 

(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 June 30,
2013       2012
Average         Avg Yield/ Average         Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 599,149 $ 6,345 4.24 % $ 568,215 $ 6,416 4.52 %
Securities(2) 608,404 4,045 2.66 644,656 4,693 2.91
Other investments - at cost 17,276 21 0.49 14,988 25 0.67
Short-term investments(3)   3,280   1   0.12   10,110   1   0.04
Total interest-earning assets 1,228,109   10,412   3.39 1,237,969   11,135   3.60
Total noninterest-earning assets   66,393   66,651
 
Total assets $ 1,294,502 $ 1,304,620
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 47,533 35 0.29 $ 62,027 64 0.41
Savings accounts 89,994 35 0.16 96,339 44 0.18
Money market accounts 195,885 193 0.39 169,360 193 0.46
Time certificates of deposit   327,036   1,127   1.38   315,892   1,222   1.55
Total interest-bearing deposits 660,448 1,390 643,618 1,523
Short-term borrowings and long-term debt   334,035   1,219   1.46   334,505   1,660   1.99
Interest-bearing liabilities   994,483   2,609   1.05   978,123   3,183   1.30
Noninterest-bearing deposits 116,479 101,701
Other noninterest-bearing liabilities   9,992   10,919
Total noninterest-bearing liabilities   126,471   112,620
 
Total liabilities 1,120,954 1,090,743
Total equity   173,548   213,877
Total liabilities and equity $ 1,294,502 $ 1,304,620
Less: Tax-equivalent adjustment(2)   (166 )   (225 )
Net interest and dividend income $ 7,637   $ 7,727  
Net interest rate spread(4) 2.34 % 2.30 %
Net interest margin(5) 2.55 % 2.58 %

Average interest-earning assets to average interest-bearing liabilities

123.49 126.57
 
 

(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.

      Six Months Ended June 30,
2013       2012
Average         Avg Yield/   Average         Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 594,745 $ 12,656 4.26 % $ 561,837 $ 12,837 4.57 %
Securities(2) 610,832 8,246 2.70 633,755 9,193 2.90
Other investments - at cost 16,975 40 0.47 14,643 47 0.64
Short-term investments(3)   5,635   3   0.11   12,075   1   0.02
Total interest-earning assets 1,228,187   20,945   3.41 1,222,310   22,078   3.61
Total noninterest-earning assets   66,122   65,764
 
Total assets $ 1,294,309 $ 1,288,074
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 48,857 72 0.29 $ 65,129 167 0.51
Savings accounts 90,877 72 0.16 97,148 108 0.22
Money market accounts 185,111 358 0.39 163,223 421 0.52
Time certificates of deposit   326,712   2,275   1.39   315,692   2,463   1.56
Total interest-bearing deposits 651,557 2,777 641,192 3,159
Short-term borrowings and long-term debt   340,174   2,511   1.48   319,759   3,321   2.08
Interest-bearing liabilities   991,731   5,288   1.07   960,951   6,480   1.35
Noninterest-bearing deposits 114,723 100,596
Other noninterest-bearing liabilities   10,021   10,598
Total noninterest-bearing liabilities   124,744   111,194
 
Total liabilities 1,116,475 1,072,145
Total equity   177,834   215,929
Total liabilities and equity $ 1,294,309 $ 1,288,074
Less: Tax-equivalent adjustment(2)   (350 )   (454 )
Net interest and dividend income $ 15,307   $ 15,144  
Net interest rate spread(4) 2.34 % 2.26 %
Net interest margin(5) 2.57 % 2.57 %

Ratio of average interest-earning assets to average interest-bearing liabilities

123.84 127.20

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

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