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Westfield Financial, Inc. Reports Results for the Quarter Ended March 31, 2016 and Declares Quarterly Dividend

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WESTFIELD, Mass.--(BUSINESS WIRE)--

Westfield Financial, Inc. (the "Company") (NasdaqGS:WFD), the holding company for Westfield Bank (the "Bank"), reported net income of $2.0 million, or $0.11 per diluted share, for the quarter ended March 31, 2016, compared to $1.3 million, or $0.08 per diluted share, for the quarter ended March 31, 2015.

Selected financial highlights for first quarter 2016 include:

  • Total loans increased $96.6 million, or 13.2%, to $827.0 million at March 31, 2016 compared to $730.4 million at March 31, 2015. This was primarily due to increases in residential loans of $63.6 million and commercial real estate loans of $36.0 million. On a sequential-quarter basis, total loans increased $8.8 million, or 1.1%, from $818.2 million at December 31, 2015. This was due to an increase in commercial real estate loans of $20.1 million, offset by a decrease in commercial and industrial loans of $10.8 million, primarily due to the payoff of an $8.8 million loan relationship that occurred late in the first quarter of 2016 and was considered a Shared National Credit.
  • Net interest and dividend income increased $653,000 to $8.2 million for the quarter ended March 31, 2016 compared to $7.6 million for the comparable 2015 period. On a sequential-quarter basis, net interest and dividend income increased $90,000 for the quarter ended March 31, 2016, compared to the quarter ended December 31, 2015.
  • For the quarter ended March 31, 2016, the Company recorded a $600,000 credit to the provision for loan losses, compared to $300,000 in provision expense for the quarter ended March 31, 2015. The credit to the provision was primarily the result of an $852,000 recovery on a single commercial real estate loan.
  • Securities declined $198.9 million, or 38.6%, to $316.3 million at March 31, 2016, compared to $515.2 million at March 31, 2015. On a sequential-quarter basis, securities decreased by $119.6 million, or 27.4%, at March 31, 2016, compared to $435.9 million at December 31, 2015. During the current quarter, the Bank transferred its securities classified as held-to-maturity into available-for-sale. A total of $136.8 million in securities were sold near the end of the quarter which resulted in a net gain of $685,000 for the first quarter 2016.
  • The Bank prepaid long-term Federal Home Loan Bank borrowings in the amount of $42.5 million with a weighted average rate of 2.29% and incurred a prepayment expense of $915,000 for the first quarter 2016 in order to reduce reliance on wholesale funding.
  • Tangible book value at March 31, 2016 was $7.83 per share, an increase of 2.6% from the prior quarter ended December 31, 2015 and an increase of 3.6% from the first quarter of 2015, and represents its highest level since the first quarter of 2013.

"Our long term goal has been to actively improve our balance sheet mix by increasing loans and decreasing securities," said James C. Hagan, President and CEO. "In the five years since March 31, 2011, we increased loans by $301.6 million, which equates to 64.4% of average interest-earning assets, up from 44.3% at March 31, 2011. In that same five year period, we increased deposits by $220.6 million and reduced borrowings by $55.8 million.

During this first quarter, we took advantage of market conditions to further reduce our securities portfolio along with our borrowings. In doing so, we have also reduced the dollar amount of instruments that are marked to market impacting accumulated other comprehensive income, and therefore, tangible book value. While this has resulted in a large net cash position, our intent was to create liquidity to enable us to continue to improve our asset mix as well as improving our funding mix to enhance our franchise value. As of April 29, 2016, total loans have increased $49.0 million and borrowings have decreased by $13.0 million due to the payoff of a matured borrowing, compared to March 31, 2016."

Hagan went on to say, "We have taken action to strategically expand our market reach into northern Connecticut and this has proven successful for us. Granby, Connecticut, which opened in June 2013 and Enfield, Connecticut, which opened in November 2014, now have over $56.0 million in deposits. While Connecticut was a new market for us, our experienced regional leadership team worked to cultivate customer deposit and loan relationships and we found the customer base to be very receptive to our brand of banking.

On April 4, 2016, Westfield Financial announced the signing of a definitive merger agreement with Chicopee Bancorp whereby Chicopee will merge with and into Westfield. The partnership is exciting because of the commonality of our cultures, our operating models and customer service focus of our two institutions. The complimentary nature of our branch footprints creates opportunity for growth and expansion into new markets for Westfield. A merger of our two banks will be extremely favorable for the shareholders, customers, employees and communities of both institutions."

Additional Income Statement Discussion

The net interest margin increased 9 basis points to 2.61% for the quarter ended March 31, 2016, compared to 2.52% for the quarter ended March 31, 2015, primarily driven by the positive shift in asset mix from securities into loans. The yield on average interest-earning assets increased 13 basis points while the cost of average interest-bearing liabilities increased 3 basis points.

Income from service charges and fees increased $246,000 to $884,000 for the quarter ended March 31, 2016, compared to $638,000 for the same period in 2015, due primarily to $106,000 in fee income related to an interest rate swap and a $102,000 increase in debit card interchange income.

Non-interest expense was $7.1 million for the quarter ended March 31, 2016 and $6.7 million for the quarter ended March 31, 2015. The increase was primarily due to $154,000 in merger-related expenses for the quarter ended March 31, 2016, compared to none in the 2015 period. The efficiency ratio, excluding non-core items, improved to 74.54% during the first quarter of 2016 from 78.08% for the three months ended March 31, 2015.

Additional Balance Sheet Discussion

Total deposits increased $54.8 million, or 6.3%, to $928.1 million at March 31, 2016, compared to $873.3 million at March 31, 2015. This was primarily due to increases in money market accounts of $20.4 million, term accounts of $17.7 million, checking accounts of $16.3 million and regular savings accounts of $379,000.

Shareholders' equity was $143.0 million at March 31, 2016 and $139.5 million at December 31, 2015, which represented 10.4% of total assets in both periods. The increase in shareholders' equity during the quarter reflects net income of $2.0 million for the quarter ended March 31, 2016 and an increase in accumulated other comprehensive income of $1.9 million, partially offset by the payment of a quarterly dividend of $519,000.

Credit Quality

The allowance for loan losses was $8.9 million at March 31, 2016, $8.8 million at December 31, 2015 and $8.0 million at March 31, 2015, representing 1.07%, 1.08% and 1.10% of total loans, respectively. This represents 106.8%, 109.4% and 96.3% of nonperforming loans at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

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

   
Three Months Ended
March 31,
2016
  December 31,
2015
  March 31,
2015
(In thousands)
 
Balance, beginning of period $ 8,840 $ 8,372 $ 7,948
(Credit) provision (600 ) 475 300
Charge-offs (243 ) (65 ) (225 )
Recoveries   858     58     12  
Balance, end of period $ 8,855   $ 8,840   $ 8,035  
 

Nonperforming loans were $8.3 million and $8.0 million, representing 1.00% and 0.99% of total loans at March 31, 2016 and December 31, 2015, respectively. Loans delinquent 30 – 89 days decreased $1.5 million to $1.4 million at March 31, 2016 from $2.9 million at December 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 May 25, 2016 to all shareholders of record on May 16, 2016.

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, 2015, 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
(In thousands, except share and per share data)
(Unaudited)

   
Three Months Ended
March 31,
2016
  December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
INTEREST AND DIVIDEND INCOME:
Loans $ 8,250 $ 8,072 $ 7,849 $ 7,371 $ 7,229
Securities 2,554 2,609 2,997 3,049 2,885
Other investments - at cost 132 133 126 69 68
Federal funds sold, interest-bearing deposits and other short-term investments   25     6     2     5     6  
Total interest and dividend income   10,961     10,820     10,974     10,494     10,188  
 
INTEREST EXPENSE:
Deposits 1,472 1,436 1,414 1,380 1,341
Long-term debt 842 889 1,083 1,092 1,070
Short-term borrowings   404     342     317     243     187  
Total interest expense   2,718     2,667     2,814     2,715     2,598  
 
Net interest and dividend income 8,243 8,153 8,160 7,779 7,590
 
(CREDIT) PROVISION FOR LOAN LOSSES   (600 )   475     150     350     300  
 
Net interest and dividend income after (credit) provision for loan losses   8,843     7,678     8,010     7,429     7,290  
 
NONINTEREST INCOME:
Service charges and fees 884 865 789 840 638
Income from bank-owned life insurance 361 378 374 407 367
Loss on prepayment of borrowings (915 ) - (429 ) (278 ) (593 )
Gain on sales of securities, net   685     (1 )   414     276     817  
Total noninterest income   1,015     1,242     1,148     1,245     1,229  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,871 3,822 3,903 3,863 3,821
Occupancy 801 795 784 818 840
Data processing 621 582 636 559 585
Professional fees 516 568 596 488 472
FDIC insurance 190 208 212 188 193
Merger related expenses 154 55 - - -
Other   919     960     736     949     800  
Total noninterest expense   7,072     6,990     6,867     6,865     6,711  
 
INCOME BEFORE INCOME TAXES 2,786 1,930 2,291 1,809 1,808
 
INCOME TAX PROVISION   822     529     680     445     470  
NET INCOME $ 1,964   $ 1,401   $ 1,611   $ 1,364   $ 1,338  
 
Basic earnings per share $ 0.11 $ 0.08 $ 0.09 $ 0.08 $ 0.08
Weighted average shares outstanding 17,304,088 17,329,248 17,461,472 17,519,562 17,684,498
Diluted earnings per share $ 0.11 $ 0.08 $ 0.09 $ 0.08 $ 0.08
Weighted average diluted shares outstanding 17,304,088 17,329,248 17,461,472 17,519,562 17,684,498
 
Other Data:
Return on average assets (1) 0.58 % 0.41 % 0.47 % 0.41 % 0.41 %
Return on average equity (1) 5.61 % 3.99 % 4.69 % 3.89 % 3.82 %
Efficiency Ratio 74.54 % 74.39 % 73.66 % 76.06 % 78.08 %
Net interest margin 2.61 % 2.58 % 2.53 % 2.50 % 2.52 %

(1) 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)

           
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
March 31,
2015
Cash and cash equivalents $ 155,194 $ 13,703 $ 21,980 $ 13,694 $ 12,719
Securities available for sale, at fair value 302,224 182,590 191,324 245,004 233,591
Securities held to maturity, at cost - 238,219 248,757 256,303 266,718
Federal Home Loan Bank of Boston and other restricted stock - at cost 14,080 15,074 15,839 15,372 14,934
 
Loans 826,963 818,213 806,893 759,382 730,354
Allowance for loan losses   8,855     8,840     8,372     8,295     8,035  
Net loans 818,108 809,373 798,521 751,087 722,319
 
Bank-owned life insurance 50,591 50,230 49,852 49,477 49,070
Other assets   28,747     30,741     30,942     30,749     29,660  
TOTAL ASSETS $ 1,368,944   $ 1,339,930   $ 1,357,215   $ 1,361,686   $ 1,329,011  
 
Total deposits $ 928,124 $ 900,363 $ 909,041 $ 897,714 $ 873,303
Short-term borrowings 158,593 128,407 121,222 111,251 82,625
Long-term debt 90,943 153,358 166,407 195,772 212,637
Trades pending settlement 30,570 - - - -
Other liabilities   17,719     18,336     20,937     17,124     20,156  
TOTAL LIABILITIES 1,225,949 1,200,464 1,217,607 1,221,861 1,188,721
 
TOTAL SHAREHOLDERS' EQUITY   142,995     139,466     139,608     139,825     140,290  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,368,944   $ 1,339,930   $ 1,357,215   $ 1,361,686   $ 1,329,011  
 
Book value per share $ 7.83 $ 7.63 $ 7.59 $ 7.56 $ 7.56
 
Other Data:
30- 89 day delinquent loans $ 1,358 $ 2,876 $ 5,882 $ 1,744 $ 1,973
Nonperforming loans 8,288 8,080 7,347 8,013 8,340
Nonperforming loans as a percentage of total loans 1.00 % 0.99 % 0.91 % 1.06 % 1.14 %
Nonperforming assets as a percentage of total assets 0.61 % 0.60 % 0.54 % 0.59 % 0.63 %
Allowance for loan losses as a percentage of nonperforming loans 106.84 % 109.41 % 113.95 % 103.52 % 96.34 %
Allowance for loan losses as a percentage of total loans 1.07 % 1.08 % 1.04 % 1.09 % 1.10 %
 

The following tables set forth the information relating to our average balances and net interest income for the three months ended March 31, 2016, December 31, 2015, and March 31, 2015, 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, 2016   December 31, 2015   March 31, 2015
Average
Balance
  Interest   Avg Yield/
Cost
Average
Balance
  Interest   Avg Yield/
Cost
Average
Balance
  Interest   Avg Yield/
Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 823,335 $ 8,280 4.02 % $ 806,519 $ 8,102 4.02 % $ 727,447 $ 7,260 3.99 %
Securities(2) 411,034 2,590 2.52 429,571 2,654 2.47 481,919 2,975 2.47
Other investments - at cost 16,051 132 3.29 16,374 133 3.25 16,234 68 1.68
Short-term investments(3)   28,276   25   0.35   13,660   6   0.18   15,744   6   0.15
Total interest-earning assets 1,278,696   11,027   3.45 1,266,124   10,895   3.44 1,241,344   10,309   3.32
Total noninterest-earning assets   80,510   80,868   78,084
Total assets $ 1,359,206 $ 1,346,992 $ 1,319,428
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts $ 30,531 20 0.26 $ 28,745 17 0.24 $ 38,079 21 0.22
Savings accounts 76,958 20 0.10 75,426 20 0.11 75,725 19 0.10
Money market accounts 248,597 227 0.37 242,165 204 0.34 233,418 220 0.38
Time certificates of deposit   398,598   1,205   1.21   402,837   1,195   1.19   368,463   1,081   1.17
Total interest-bearing deposits 754,684 1,472 749,173 1,436 715,685 1,341
Short-term borrowings and long-term debt   290,069   1,246   1.72   285,687   1,231   1.72   308,379   1,257   1.63
Interest-bearing liabilities   1,044,753   2,718   1.04   1,034,860   2,667   1.03   1,024,064   2,598   1.01
Noninterest-bearing deposits 155,887 153,969 134,902
Other noninterest-bearing liabilities   17,987   18,992   18,473
Total noninterest-bearing liabilities   173,874   172,961   153,375
 
Total liabilities 1,218,627 1,207,821 1,177,439
Total equity   140,579   139,171   141,990
Total liabilities and equity $ 1,359,206 $ 1,346,992 $ 1,319,429
Less: Tax-equivalent adjustment(2)   (66 )   (75 )   (121 )
Net interest and dividend income $ 8,243   $ 8,153   $ 7,590  
Net interest rate spread(4) 2.41 % 2.41 % 2.31 %
Net interest margin(5) 2.61 % 2.58 % 2.52 %
Ratio of average interest-earning
assets to average interest-bearing liabilities 122.39 122.35 121.22

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

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