Westfield Financial, Inc. Reports Results for the Quarter Ended June 30, 2015 and Declares Quarterly Dividend

Loan growth continues to be strong at 10.7% year-over-year

WESTFIELD, Mass.--()--Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.4 million, or $0.08 per diluted share, for the quarter ended June 30, 2015, compared to $1.3 million, or $0.07 per diluted share, for the quarter ended June 30, 2014. For the six months ended June 30, 2015, net income was $2.7 million, or $0.15 per diluted share, compared to $3.0 million, or $0.16 per diluted share, for the same period in 2014.

Selected financial highlights for second quarter 2015 include:

  • Total loans increased $73.3 million, or 10.7%, to $759.4 million at June 30, 2015 compared to $686.1 million at June 30, 2014. This was primarily due to increases in residential loans of $47.3 million, commercial and industrial loans of $23.4 million and commercial real estate loans of $2.1 million. On a sequential-quarter basis, total loans increased $29.0 million, or 4.0%, for the second quarter of 2015. This was due to an increase in residential loans of $19.7 million and commercial and industrial loans of $8.1 million.
  • Securities increased $20.7 million, or 4.2%, to $516.7 million at June 30, 2015, compared to $496.0 million at June 30, 2014. On a sequential-quarter basis, securities were relatively flat at June 30, 2015, compared to $515.2 million at March 31, 2015.
  • Net interest and dividend income increased $78,000 to $7.8 million for the quarter ended June 30, 2015 compared to $7.7 million for the comparable 2014 period. On a sequential-quarter basis, net interest and dividend income increased $189,000 for the quarter ended June 30, 2015, compared to the quarter ended March 31, 2015.
  • The Bank prepaid $10.0 million in Federal Home Loan Bank borrowings with a weighted average rate of 2.77% and incurred a prepayment expense of $278,000 in the second quarter 2015 in order to eliminate a higher-cost liability. Net gains on the sales of securities of $276,000 were used to partially offset the prepayment expense.
  • Noninterest expense increased $334,000 to $6.9 million for the quarter ended June 30, 2015 compared to the second quarter of 2014. On a sequential-quarter basis, noninterest expense increased by $154,000 for the quarter ended June 30, 2015, compared to $6.7 million for the quarter ended March 31, 2015. The efficiency ratio, excluding non-core items, was 76.1% for the second quarter of 2015, compared to 78.1% for the quarter ended March 31, 2015.

President and CEO, James C. Hagan stated, “Over the past twelve months, we have seen significant momentum in our efforts to grow both the loan portfolio and our deposit base. With loans increasing 10.7% year-over-year, we are demonstrating our commitment to growing our core customer franchise. We are also pleased to announce that Christopher Fager, Assistant Vice President Commercial Lending, has recently joined Westfield Bank’s commercial team. Christopher brings over six years of banking experience and is based in our commercial lending office in downtown Springfield, which was established in August 2014.

We continue to see success in Westfield Bank’s recent market expansion into northern Connecticut. Our two Connecticut offices now have over $36.6 million in deposits. The Granby, Connecticut office has been open just over two years and Enfield, Connecticut opened in November 2014. The customer base in the Connecticut market is very receptive to our brand of banking and our objective is to continue to develop loan and deposit relationships.”

Hagan continued, “In addition, we remain committed to utilizing excess capital to improve shareholder value through our repurchase program, shareholder dividends and organic growth.”

Additional Income Statement Discussion

Net interest and dividend income was $15.4 million for both the six months ended June 30, 2015 and 2014. The net interest margin for the six months ended June 30, 2015 decreased 11 basis points to 2.51%, as compared to 2.62% for the same period in 2014. This was a result of a decrease of 7 basis points in the yield on average interest-earning assets along with a 5 basis point increase in the cost of average interest-bearing liabilities.

The net interest margin for the quarter ended June 30, 2015 decreased 11 basis point to 2.50%, as compared to 2.61% for the second quarter of 2014. On a sequential-quarter basis, the net interest margin decreased 2 basis points for the quarter ended June 30, 2015 compared to the quarter ended March 31, 2015.

Non-interest income increased $206,000 to $1.2 million for the quarter ended June 30, 2015, compared to $1.0 million for the same period in 2014. This was primarily due to an increase of $40,000 in debit card interchange fees and a one-time payment pertaining to a vendor contract negotiation, which resulted in a net increase of $130,000.

Non-interest expense was $6.9 million for the quarter ended June 30, 2015, compared to $6.5 million for the same period in 2014. Non-interest expense increased $510,000 to $13.6 million from $13.1 million for the six months ended June 30, 2015, compared to the same period in 2014. Salaries and benefits increased $240,000 and occupancy expense increased $147,000. This was driven by opening of a new branch in November 2014 along with normal increases in these areas. On a sequential quarter basis, other expenses increased $149,000 to $949,000 for June 30, 2015, primarily due to management’s decision to allocate more of the advertising, marketing and sponsorships expense during the second quarter. The efficiency ratio, excluding non-core items, was 77.0% and 75.0% for the six months ended June 30, 2015 and 2014, respectively.

Additional Balance Sheet Discussion

Total deposits increased $79.1 million, or 9.7%, to $897.7 million at June 30, 2015, compared to $818.6 million at June 30, 2014. This was primarily due to increases in term accounts of $61.0 million, money market accounts of $18.2 million and checking accounts of $5.3 million, partially offset by a decrease in savings accounts of $5.3 million. On a consecutive quarter basis, total deposits increased $24.4 million, or 2.7%, to $897.7 million at June 30, 2015, compared to $873.3 million at March 31, 2015. In addition, short-term borrowings and long term debt increased $11.8 million to $307.0 million at June 30, 2015, compared to $295.3 million at March 31, 2015.

Shareholders’ equity was $139.8 million at June 30, 2015 and $140.3 million at March 31, 2015, which represented 10.3% and 10.6% of total assets, respectively. The decrease in shareholders’ equity during the quarter reflects a decrease in accumulated other comprehensive income of $1.0 million, the repurchase of 62,686 shares of common stock for $470,000 (an average price of $7.50 per share) and the payment of a quarterly dividend of $526,000. This was offset by net income of $1.3 million for the quarter ended June 30, 2015.

On March 13, 2015, the Company announced a repurchase program under which it may repurchase up to 1,970,000 shares, or 10% of its outstanding common stock. At June 30, 2015, there were 711,733 shares remaining under this repurchase program.

Credit Quality

The allowance for loan losses was $8.3 million at June 30, 2015 and $8.0 million at March 31, 2015 and June 30, 2014, representing 1.09%, 1.10% and 1.17% of total loans, respectively. This represents 103.5%, 96.3% and 248.6% of nonperforming loans at June 30, 2015, March 31, 2015 and June 30, 2014, respectively.

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

       
Three Months Ended
June 30,   March 31,   June 30,
  2015     2015     2014  
(In thousands)
 
Balance, beginning of period $ 8,035 $ 7,948 $ 7,567
Provision 350 300 450
Charge-offs (101 ) (225 ) (13 )
Recoveries   11     12     13  
Balance, end of period $ 8,295   $ 8,035   $ 8,017  
 

Nonperforming loans were $8.0 million and $8.3 million, representing 1.06% and 1.14% of total loans at June 30, 2015 and March 31, 2015, respectively. Loans delinquent 30 – 89 days decreased $229,000 to $1.7 million at June 30, 2015 from $2.0 million at March 31, 2015. There are no loans 90 or more days past due and still accruing interest.

Declaration of Quarterly Dividend

The Board of Directors approved the declaration of a quarterly cash dividend of $0.03 per share. The dividend is payable on August 26, 2015 to all shareholders of record on August 12, 2015.

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 operate through 13 banking offices located in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts, and Granby and Enfield, Connecticut. To learn more, visit our website at www.westfieldbank.com.

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, 2014, 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,   December 31,   September 30,   June 30, June 30,
  2015       2015       2014       2014       2014         2015       2014  
INTEREST AND DIVIDEND INCOME:  
Loans $ 7,371 $ 7,229 $ 7,331 $ 7,135 $ 6,821 $ 14,601 $ 13,378
Securities 3,049 2,885 3,079 3,147 3,256 5,935 6,662
Other investments - at cost 69 68 59 59 63 137 128

Federal funds sold, interest-bearing deposits
and other short-term investments

  5       6       2       2       3         11       9  
Total interest and dividend income   10,494       10,188       10,471       10,343       10,143         20,684       20,177  
 
INTEREST EXPENSE:
Deposits 1,380 1,341 1,300 1,298 1,288 2,721 2,580
Long-term debt 1,092 1,070 1,119 1,125 1,071 2,162 2,081
Short-term borrowings   243       187       174       86       83         431       160  
Total interest expense   2,715       2,598       2,593       2,509       2,442         5,314       4,821  
 
Net interest and dividend income 7,779 7,590 7,878 7,834 7,701 15,370 15,356
 
PROVISION FOR LOAN LOSSES   350       300       275       750       450         650       550  
 
Net interest and dividend income after provision for loan losses   7,429       7,290       7,603       7,084       7,251         14,720       14,806  
 
NONINTEREST INCOME:
Service charges and fees 840 638 659 655 632 1,477 1,303
Income from bank-owned life insurance 407 367 374 384 386 774 765
Loss on prepayment of borrowings (278 ) (593 ) - - - (871 ) -
Gain on sales of securities, net   276       817       44       226       21         1,093       50  
Total noninterest income   1,245       1,229       1,077       1,265       1,039         2,473       2,118  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,863 3,821 3,643 3,623 3,665 7,684 7,444
Occupancy 818 840 821 743 751 1,659 1,512
Data processing 559 585 616 600 610 1,143 1,125
Professional fees 488 472 447 495 483 959 994
FDIC insurance 188 193 205 166 177 381 342
Other   949       800       764       721       845         1,750       1,649  
Total noninterest expense   6,865       6,711       6,496       6,348       6,531         13,576       13,066  
 
INCOME BEFORE INCOME TAXES 1,809 1,808 2,184 2,001 1,759 3,617 3,858
 
INCOME TAX PROVISION   445       470       523       491       417         915       868  
NET INCOME $ 1,364     $ 1,338     $ 1,661     $ 1,510     $ 1,342       $ 2,702     $ 2,990  
 
Basic earnings per share $ 0.08 $ 0.08 $ 0.09 $ 0.08 $ 0.07 $ 0.15 $ 0.16
Weighted average shares outstanding 17,519,562 17,684,498 17,718,143 17,910,223 18,308,828 17,601,575 18,559,419
Diluted earnings per share $ 0.08 $ 0.08 $ 0.09 $ 0.08 $ 0.07 $ 0.15 $ 0.16
Weighted average diluted shares outstanding 17,519,562 17,684,498 17,718,143 17,910,223 18,308,828 17,601,575 18,559,419
 
Other Data:
Return on average assets (1) 0.41 % 0.41 % 0.50 % 0.46 % 0.42 % 0.41 % 0.47 %
Return on average equity (1) 3.89 % 3.82 % 4.57 % 4.12 % 3.64 % 3.86 % 4.01 %
Efficiency ratio (2) 76.06 % 78.08 % 72.90 % 71.54 % 74.91 % 77.04 % 74.99 %
Net interest margin 2.50 % 2.52 % 2.56 % 2.58 % 2.61 % 2.51 % 2.62 %

 

(1) Three month results have been annualized.
(2) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income, excluding gain and loss on sale of securities, gain on bank-owned life insurance death benefit and loss on prepayment of borrowings.

               

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, September 30, June 30,
  2015     2015     2014     2014     2014  
Cash and cash equivalents $ 13,694 $ 12,719 $ 18,785 $ 14,429 $ 39,362
Securities available for sale, at fair value 245,004 233,591 215,750 212,460 192,754
Securities held to maturity, at cost 256,303 266,718 278,080 283,684 288,199

Federal Home Loan Bank of Boston and other
restricted stock - at cost

15,372 14,934 14,934 14,720 15,056
 
Loans 759,382 730,354 724,686 719,555 686,068
Allowance for loan losses   8,295     8,035     7,948     7,695     8,017  
Net loans 751,087 722,319 716,738 711,860 678,051
 
Bank-owned life insurance 49,477 49,070 48,703 48,329 47,945
Other assets   30,749     29,660     27,106     25,699     24,951  
TOTAL ASSETS $ 1,361,686   $ 1,329,011   $ 1,320,096   $ 1,311,181   $ 1,286,318  
 
Total deposits $ 897,714 $ 873,303 $ 834,218 $ 828,785 $ 818,590
Short-term borrowings 111,251 82,625 93,997 78,685 59,751
Long-term debt 195,772 212,637 232,479 246,804 248,760
Securities pending settlement - - - 137 67
Other liabilities   17,124     20,156     16,859     12,464     12,185  
TOTAL LIABILITIES 1,221,861 1,188,721 1,177,553 1,166,875 1,139,353
 
TOTAL SHAREHOLDERS' EQUITY   139,825     140,290     142,543     144,306     146,965  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,361,686   $ 1,329,011   $ 1,320,096   $ 1,311,181   $ 1,286,318  
 
Book value per share $ 7.56 $ 7.56 $ 7.61 $ 7.67 $ 7.67
 
Other Data:
30- 89 day delinquent loans $ 1,744 $ 1,973 $ 3,821 $ 4,254 $ 5,539
Nonperforming loans 8,013 8,340 8,830 8,867 3,225
Nonperforming loans as a percentage of total loans 1.06 % 1.14 % 1.22 % 1.23 % 0.47 %
Nonperforming assets as a percentage of total assets 0.59 % 0.63 % 0.67 % 0.68 % 0.25 %
Allowance for loan losses as a percentage of nonperforming loans 103.52 % 96.34 % 90.01 % 86.78 % 248.59 %
Allowance for loan losses as a percentage of total loans 1.09 % 1.10 % 1.10 % 1.07 % 1.17 %
 

The following tables set forth the information relating to our average balances and net interest income for the three months ended June 30, 2015, March 31, 2015, and June 30, 2014, and the six months ended June 30, 2015 and 2014, 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, 2015     March 31, 2015     June 30, 2014
Average     Avg Yield/ Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 742,475 $ 7,401 3.99 % $ 727,447 $ 7,260 3.99 % $ 665,024 $ 6,857 4.12 %
Securities(2) 498,093 3,135 2.52 481,919 2,975 2.47 501,132 3,357 2.68
Other investments - at cost 16,460 69 1.68 16,234 68 1.68 16,546 63 1.52
Short-term investments(3)   11,231   5   0.18   15,744   6   0.15   19,912   3   0.06
Total interest-earning assets 1,268,259   10,610   3.35 1,241,344   10,309   3.32 1,202,614   10,280   3.42
Total noninterest-earning assets   80,303   78,084   72,051
Total assets $ 1,348,562 $ 1,319,428 $ 1,274,665
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts $ 35,954 20 0.22 $ 38,079 21 0.22 $ 41,797 26 0.25
Savings accounts 75,669 20 0.11 75,725 19 0.10 81,144 21 0.10
Money market accounts 236,322 208 0.35 233,418 220 0.38 213,227 208 0.39
Time certificates of deposit   390,616   1,132   1.16   368,463   1,081   1.17   341,041   1,033   1.21
Total interest-bearing deposits 738,561 1,380 715,685 1,341 677,209 1,288
Short-term borrowings and long-term debt   307,892   1,335   1.73   308,379   1,257   1.63   308,757   1,154   1.50
Interest-bearing liabilities   1,046,453   2,715   1.04   1,024,064   2,598   1.01   985,966   2,442   0.99
Noninterest-bearing deposits 143,323 134,902 130,033
Other noninterest-bearing liabilities   18,302   18,473   10,679
Total noninterest-bearing liabilities   161,625   153,375   140,712
 
Total liabilities 1,208,078 1,177,439 1,126,678
Total equity   140,484   141,990   147,987
Total liabilities and equity $ 1,348,562 $ 1,319,429 $ 1,274,665
Less: Tax-equivalent adjustment(2)   (116 )   (121 )   (137 )
Net interest and dividend income $ 7,779   $ 7,590   $ 7,701  
Net interest rate spread(4) 2.31 % 2.31 % 2.43 %
Net interest margin(5) 2.50 % 2.52 % 2.61 %
Ratio of average interest-earning
assets to average interest-bearing liabilities 121.20 121.22 121.97
 
       
Six Months Ended June 30,
2015     2014
Average     Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 735,003 $ 14,662 3.99 % $ 653,007 $ 13,452 4.12 %
Securities(2) 490,051 6,109 2.49 515,509 6,861 2.66
Other investments - at cost 16,347 138 1.69 17,035 128 1.50
Short-term investments(3)   13,475   11   0.16   16,483   9   0.11
Total interest-earning assets 1,254,876   20,920   3.33 1,202,034   20,450   3.40
Total noninterest-earning assets   79,197   72,520
 
Total assets $ 1,334,073 $ 1,274,554
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking $ 37,011 41 0.22 $ 42,342 55 0.26
Savings accounts 75,697 39 0.10 80,805 41 0.10
Money market accounts 234,878 429 0.37 212,062 401 0.38
Time certificates of deposit   379,600   2,212   1.17   340,736   2,083   1.22
Total interest-bearing deposits 727,186 2,721 675,945 2,580
Short-term borrowings and long-term debt   308,134   2,593   1.68   308,700   2,241   1.45
Interest-bearing liabilities   1,035,320   5,314   1.03   984,645   4,821   0.98
Noninterest-bearing deposits 139,136 129,730
Other noninterest-bearing liabilities   18,384   9,883
Total noninterest-bearing liabilities   157,520   139,613
 
Total liabilities 1,192,840 1,124,258
Total equity   141,233   150,296
Total liabilities and equity $ 1,334,073 $ 1,274,554
Less: Tax-equivalent adjustment(2)   (236 )   (273 )
Net interest and dividend income $ 15,370   $ 15,356  
Net interest rate spread(4) 2.30 % 2.42 %
Net interest margin(5) 2.51 % 2.62 %
Ratio of average interest-earning
assets to average interest-bearing liabilities           121.21 122.08
 

(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.

Contacts

Westfield Financial, Inc.
James C. Hagan, 413-568-1911
President & CEO
or
Leo R. Sagan, Jr., 413-568-1911
CFO
or
Meghan Hibner, 413-568-1911
VP Investor Relations Officer

Release Summary

Westfield Financial, Inc. Reports Results for the Quarter Ended June 30, 2015 and Declares Quarterly Dividend

Contacts

Westfield Financial, Inc.
James C. Hagan, 413-568-1911
President & CEO
or
Leo R. Sagan, Jr., 413-568-1911
CFO
or
Meghan Hibner, 413-568-1911
VP Investor Relations Officer