WESTFIELD FINANCIAL, INC. 8-K

Exhibit 99.1

 

For further information contact: James C. Hagan, President & CEO Leo R. Sagan, Jr., CFO Meghan Hibner, VP Investor Relations Officer 413-568-1911

 

 

WESTFIELD FINANCIAL, INC. REPORTS RESULTS FOR THE QUARTER AND YEAR ENDED DECEMBER 31, 2014 AND DECLARES QUARTERLY DIVIDEND

 

Loan growth continues to be strong at 13.7% year-over-year

 

Westfield, Massachusetts, January 30, 2015: Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.7 million, or $0.09 per diluted share, for the quarter ended December 31, 2014, compared to $1.8 million, or $0.09 per diluted share, for the quarter ended December 31, 2013. For the year ended December 31, 2014, net income was $6.2 million, or $0.34 per diluted share, compared to $6.8 million, or $0.34 per diluted share, for the same period in 2013.

 

As a result of the significant loan growth experienced by the Bank over the past four quarters, both the three months and year ended December 31, 2014 included an expense for the provision for loan losses of $275,000 and $1.6 million, respectively. Whereas the three months ended December 31, 2013 included a provision for loan losses of $120,000, the full year ended December 31, 2013 included a credit for loan losses of $256,000 resulting from improved credit quality. In the 2014 periods, the increase to the provision for loan losses reflects significant loan growth and stabilized credit quality.

 

As the increase in the loan loss provision is largely a result of favorable loan growth, yet the impact is negative to current period earnings, the Company feels that pretax, pre-provision (“PTPP”) net income, exclusive of securities gains and other infrequent items (“adjusted PTPP net income”), is an appropriate measure that reflects the improvement being made in the Company’s core franchise. A reconciliation of adjusted PTPP net income to GAAP pretax net income is provided in the financial table at the end of this press release. The Company recorded $2.4 million of adjusted PTPP net income for the fourth quarter of 2014, an increase of 13.3% over $2.1 million for the fourth quarter of 2013. For the year ended December 31, 2014, adjusted PTPP net income was $9.3 million, an increase of 15.5% over $8.1 million for the same period in 2013.

 

Selected financial highlights for fourth quarter 2014 include:

 

• Total loans increased $87.3 million, or 13.7%, to $724.7 million at December 31, 2014 compared to $637.4 million at December 31, 2013. This was primarily due to increases in residential loans of $43.6 million, commercial and industrial loans of $30.1 million and commercial real estate loans of $13.9 million. On a sequential-quarter basis, total loans increased $5.1 million, or 0.7%, to $724.7 million for the fourth quarter of 2014. This was due to an increase in residential loans of $13.3 million, offset by a decrease in commercial real estate loans of $8.8 million due to a single payoff of $11.0 million on a commercial real estate loan during the fourth quarter 2014 that represented short-term construction financing.

 

• Securities declined $45.0 million, or 8.1%, to $508.8 million at December 31, 2014, compared to $553.8 million at December 31, 2013. On a sequential-quarter basis, securities decreased by $2.1 million, or 0.4%, at December 31, 2014, compared to $510.9 million at September 30, 2014.

 

• Net interest and dividend income increased $271,000 to $7.9 million for the quarter ended December 31, 2014 compared to $7.6 million for the comparable 2013 period. On a sequential-quarter basis, net interest and dividend income increased $44,000 for the quarter ended December 31, 2014, compared to the quarter ended September 30, 2014.

• The net interest margin for the quarter ended December 31, 2014 decreased 1 basis point to 2.56%, as compared to 2.57% for the fourth quarter of 2013. On a sequential-quarter basis, the net interest margin decreased 2 basis points for the quarter ended December 31, 2014 compared to the quarter ended September 30, 2014.

 

• Non-interest expense was $6.5 million for both the quarters ended December 31, 2014 and December 31, 2013. On a sequential-quarter basis, noninterest expense increased by $148,000 for the quarter ended December 31, 2014, compared to $6.3 million for the quarter ended September 30, 2014. The efficiency ratio, excluding non-core items, was 72.9% for the fourth quarter of 2014, compared to 75.3% for the same period in 2013.

 

President and CEO, James C. Hagan stated, “During 2014, we successfully executed several strategic initiatives.  We have improved our balance sheet mix with loan growth of 13.7% year-over-year, while decreasing our securities portfolio. In addition, we introduced wealth management services, which is a new source of fee income for the Bank, and also carefully managed non-interest expenses, which resulted in significant improvement in our efficiency ratio in 2014. Our outlook remains positive for continued loan growth as we start 2015.”

 

Hagan continued, “We are excited about our newest branch in Enfield, Connecticut, which opened in November 2014. The northern Connecticut market has been very receptive to Westfield Bank. The Enfield branch along with our location in Granby, CT, which opened in June 2013, have combined deposits of over $20.0 million. The Enfield branch, along with relocating a commercial loan team to downtown Springfield, Massachusetts, provides proximity to the I-91 corridor and better access to the borrowers and centers of influence in the greater-Springfield area and northern Connecticut.”

 

Additional Income Statement Discussion

 

Net interest and dividend income was $7.9 million for the quarter ended December 31, 2014 and $7.6 million for the quarter ended December 31, 2013. The net interest margin decreased 1 basis point to 2.56% for the quarter ended December 31, 2014, compared to 2.57% for the quarter ended December 31, 2013.

 

Net interest and dividend income increased $327,000 to $31.1 million for the year ended December 31, 2014, as compared to $30.7 million for the same period in 2013. The net interest margin for the year ended December 31, 2014 increased 2 basis points to 2.60%, as compared to 2.58% for the same period in 2013. The cost of average interest-bearing liabilities decreased 5 basis points, partially offset by a decrease of 2 basis points in the yield on average interest-earning assets.

 

Non-interest income decreased $266,000 to $1.1 million for the quarter ended December 31, 2014, compared to $1.3 million for the same period in 2013. The fourth quarter of 2014 included net gains on sales of securities of $44,000, whereas the fourth quarter of 2013 included securities gains of $330,000.

 

Non-interest expense was $6.5 million for the fourth quarters in both 2014 and 2013. Non-interest expense decreased $733,000 to $25.9 million from $26.6 million for the year ended December 31, 2014, compared to the same period in 2013, primarily driven by a $749,000 decrease in salaries and benefits. The efficiency ratio, excluding non-core items, was 73.6% and 76.8% for the years ended December 31, 2014 and 2013, respectively.

 

Additional Balance Sheet Discussion

 

Total deposits increased $17.1 million, or 2.1%, to $834.2 million at December 31, 2014, compared to $817.1 million at December 31, 2013. This was primarily due to increases in money market accounts of $22.8 million and term accounts of $16.3 million, partially offset by a decrease in checking accounts of $15.8 million and regular savings accounts of $6.2 million. On a consecutive quarter basis, total deposits increased $5.4 million, or 0.7%, to $834.2 million at December 31, 2014, compared to $828.8 million at September 30, 2014. In addition, short-term borrowings and long term debt increased $30.0 million to $326.5 million at December 31, 2014, compared to $296.5 million at December 31, 2013.  This was primarily due to an increase in borrowings from the Federal Home Loan Bank.

 

 

Shareholders’ equity was $142.5 million at December 31, 2014 and $144.3 million at September 30, 2014, which represented 10.8% and 11.0% of total assets, respectively. The decrease in shareholders’ equity during the quarter reflects the a decrease in accumulated other comprehensive income of $2.4 million, the repurchase of 87,933 shares of common stock for $632,000 (an average price of $7.18 per share) and the payment of a quarterly dividend of $530,000. This was offset by net income of $1.7 million for the quarter ended December 31, 2014.

 

On March 13, 2014, 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 December 31, 2014, there were 999,460 shares remaining under this repurchase program.

 

Credit Quality

 

The allowance for loan losses was $7.9 million at December 31, 2014, $7.7 million at September 30, 2014 and $7.5 million at December 31, 2013, representing 1.10%, 1.07% and 1.17% of total loans, respectively. This represents 90.0%, 86.8% and 288.4% of nonperforming loans at December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

 

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

 

				Three Months Ended
				December 31,				September 30,				December 31,
				2014				2014				2013
				(In thousands)
	Balance, beginning of period			$	7,695			$	8,017			$	7,311
	Provision				275				750				120
	Charge-offs				(35	)			(1,076	)			(5	)
	Recoveries				13				4				33
	Balance, end of period			$	7,948			$	7,695			$	7,459

 

Nonperforming loans were $8.8 million and $8.9 million, representing 1.22% and 1.23% of total loans at December 31, 2014 and September 30, 2014, respectively. Loans delinquent 30 – 89 days decreased $433,000 to $3.8 million at December 31, 2014 from $4.3 million at September 30, 2014. 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 February 27, 2015 to all shareholders of record on February 13, 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 12 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, 2013, 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.

 

Non-GAAP Financial Measures

 

This press release and the reconciliation table included herein include a non-GAAP financial measure for adjusted net income. A description of the adjusted calculation and reconciliation to the comparable GAAP financial measures is provided in the following table titled “Reconciliation of Adjusted Net Income to GAAP Pretax Net Income.” Company management uses these non-GAAP financial measures to monitor and evaluate its operating results and trends on an on-going basis, and internally for operating, budgeting and financial planning purposes. Company management believes the non-GAAP information is useful for investors by offering the ability to better identify trends in our business and better understand how management evaluates the business. These non-GAAP measures have limitations, however, because they do not include all items of income and expense that affect the Company. These non-GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP.

 

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME TO GAAP PRETAX NET INCOME - UNAUDITED
(Dollars in thousands)
		Quarter Ended												Year Ended
		December 31,												December 31,
		2014				2013				Change				2014				2013				Change
Income before income taxes		$	2,184			$	2,342							$	8,044			$	8,627
Add back: provision (credit) for loan losses			275				120								1,575				(256	)
Pretax, pre-provision net income			2,459				2,462								9,619				8,371
Adjust for infrequent items:
Gains on sales of securities, net			(44	)			(330	)							(320	)			(3,126	)
Loss on prepayment of borrowings			—				—								—				3,370
Gain on bank-owned life insurance death benefit			—				—								—				(563	)
Adjusted pretax, pre-provision net income		$	2,415			$	2,132				13.3	%		$	9,299			$	8,052				15.5	%

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Other Data

(In thousands, except share and per share data)

(Unaudited)

 

		Three Months Ended																				Year Ended
		December 31,				September 30,				June 30,				March 31,				December 31,				December 31,
		2014				2014				2014				2014				2013				2014				2013
INTEREST AND DIVIDEND INCOME:
Loans		$	7,331			$	7,135			$	6,821			$	6,557			$	6,458			$	27,843			$	25,408
Securities			3,079				3,147				3,256				3,406				3,594				12,889				15,521
Other investments - at cost			59				59				63				65				33				246				93
Federal funds sold, interest-bearing deposits and other short-term investments			2				2				3				6				4				13				9
Total interest and dividend income			10,471				10,343				10,143				10,034				10,089				40,991				41,031
INTEREST EXPENSE:
Deposits			1,300				1,298				1,288				1,291				1,358				5,177				5,525
Long-term debt			1,119				1,125				1,071				1,011				1,051				4,326				4,591
Short-term borrowings			174				86				83				77				73				420				174
Total interest expense			2,593				2,509				2,442				2,379				2,482				9,923				10,290
Net interest and dividend income			7,878				7,834				7,701				7,655				7,607				31,068				30,741
(CREDIT) PROVISION FOR LOAN LOSSES			275				750				450				100				120				1,575				(256	)
Net interest and dividend income after provision for loan losses			7,603				7,084				7,251				7,555				7,487				29,493				30,997
NONINTEREST INCOME:
Service charges and fees			659				655				632				670				625				2,617				2,404
Income from bank-owned life insurance			374				384				386				379				388				1,523				1,549
Gain on bank-owned life insurance death benefit			—				—				—				—				—				—				563
Loss on prepayment of borrowings			—				—				—				—				—				—				(3,370	)
Gain on sales of securities, net			44				226				21				29				330				320				3,126
Total noninterest income			1,077				1,265				1,039				1,078				1,343				4,460				4,272
NONINTEREST EXPENSE:
Salaries and employees benefits			3,643				3,623				3,665				3,778				3,774				14,709				15,458
Occupancy			821				743				751				761				731				3,076				2,898
Data processing			616				600				610				515				586				2,341				2,340
Professional fees			447				495				483				512				497				1,936				2,033
FDIC insurance			205				166				177				165				162				713				655
Other			764				721				845				803				738				3,134				3,258
Total noninterest expense			6,496				6,348				6,531				6,534				6,488				25,909				26,642
INCOME BEFORE INCOME TAXES			2,184				2,001				1,759				2,099				2,342				8,044				8,627
INCOME TAX PROVISION			523				491				417				451				533				1,882				1,871
NET INCOME		$	1,661			$	1,510			$	1,342			$	1,648			$	1,809			$	6,162			$	6,756
Basic earnings per share		$	0.09			$	0.08			$	0.07			$	0.09			$	0.09			$	0.34			$	0.34
Weighted average shares outstanding			17,718,143				17,910,223				18,308,828				18,812,795				19,379,466				18,183,739				20,079,251
Diluted earnings per share		$	0.09			$	0.08			$	0.07			$	0.09			$	0.09			$	0.34			$	0.34
Weighted average diluted shares outstanding			17,718,143				17,910,223				18,308,828				18,812,795				19,379,466				18,183,739				20,079,265
Other Data:
Return on average assets (1)			0.50	%			0.46	%			0.42	%			0.52	%			0.57	%			0.48	%			0.53	%
Return on average equity (1)			4.57	%			4.12	%			3.64	%			4.38	%			4.61	%			4.18	%			4.04	%
Efficiency ratio (2)			72.90				71.54				74.91				75.07				75.27				73.59				76.79
Net interest margin			2.56	%			2.58	%			2.61	%			2.63	%			2.57	%			2.60	%			2.58	%

 

---

(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)

 

		December 31,				September 30,				June 30,				March 31,				December 31,
		2014				2014				2014				2013				2013
Cash and cash equivalents		$	18,785			$	14,429			$	39,362			$	21,370			$	19,742
Securities available for sale, at fair value			215,750				212,460				192,754				233,899				243,204
Securities held to maturity, at cost			278,080				283,684				288,199				292,019				295,013
Federal Home Loan Bank of Boston and other  restricted stock - at cost			14,934				14,720				15,056				15,631				15,631
Loans			724,686				719,555				686,068				648,240				637,427
Allowance for loan losses			7,948				7,695				8,017				7,567				7,459
Net loans			716,738				711,860				678,051				640,673				629,968
Bank-owned life insurance			48,703				48,329				47,945				47,558				47,179
Other assets			27,106				25,699				24,951				23,866				26,104
TOTAL ASSETS		$	1,320,096			$	1,311,181			$	1,286,318			$	1,275,016			$	1,276,841
Total deposits		$	834,218			$	828,785			$	818,590			$	806,695			$	817,112
Short-term borrowings			93,997				78,685				59,751				58,460				48,197
Long-term debt			232,479				246,804				248,760				248,568				248,377
Securities pending settlement			—				137				67				195				299
Other liabilities			16,859				12,464				12,185				9,512				8,712
TOTAL LIABILITIES			1,177,553				1,166,875				1,139,353				1,123,430				1,122,697
TOTAL SHAREHOLDERS' EQUITY			142,543				144,306				146,965				151,586				154,144
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	1,320,096			$	1,311,181			$	1,286,318			$	1,275,016			$	1,276,841
Book value per share		$	7.61			$	7.67			$	7.67			$	7.66			$	7.65
Other Data:
30- 89 day delinquent loans		$	3,821			$	4,254			$	5,539			$	5,382			$	3,459
Nonperforming loans			8,830				8,867				3,225				3,095				2,586
Nonperforming loans as a percentage of total loans			1.22	%			1.23	%			0.47	%			0.48	%			0.41	%
Nonperforming assets as a percentage of total assets			0.67	%			0.68	%			0.25	%			0.24	%			0.20	%
Allowance for loan losses as a percentage of nonperforming loans			90.01	%			86.78	%			248.59	%			244.49	%			288.44	%
Allowance for loan losses as a percentage of total loans			1.10	%			1.07	%			1.17	%			1.17	%			1.17	%

  

 

The following tables set forth the information relating to our average balances and net interest income for the three months ended December 31, 2014, September 30, 2014, and December 31, 2013, and the year ended December 31, 2014 and 2013, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

 

		Three Months Ended
		December 31, 2014												September 30, 2014												December 31, 2013
		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)		$	721,528			$	7,363				4.08	%		$	703,736			$	7,170				4.08	%		$	619,240			$	6,495				4.20	%
Securities(2)			494,519				3,181				2.57				492,948				3,245				2.63				541,370				3,719				2.75
Other investments - at cost			16,202				59				1.46				16,129				59				1.46				17,537				19				0.43
Short-term investments(3)			9,721				2				0.08				12,399				2				0.06				18,383				4				0.09
Total interest-earning assets			1,241,970				10,605				3.42				1,225,212				10,476				3.42				1,196,530				10,237				3.42
Total noninterest-earning assets			75,286												72,984												73,528
Total assets		$	1,317,256											$	1,298,196											$	1,270,058
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts		$	38,138				22				0.23			$	38,889				22				0.23			$	44,521				29				0.26
Savings accounts			75,928				20				0.11				78,860				20				0.10				82,535				21				0.10
Money market accounts			233,582				220				0.38				227,554				225				0.40				207,801				199				0.38
Time certificates of deposit			348,928				1,038				1.19				342,281				1,031				1.20				338,272				1,109				1.31
Total interest-bearing deposits			696,576				1,300								687,584				1,298								673,129				1,358
Short-term borrowings and long-term debt			324,394				1,293				1.59				318,357				1,211				1.52				304,403				1,124				1.48
Interest-bearing liabilities			1,020,970				2,593				1.02				1,005,941				2,509				1.00				977,532				2,482				1.02
Noninterest-bearing deposits			138,311												133,817												125,959
Other noninterest-bearing liabilities			13,802												13,139												10,762
Total noninterest-bearing liabilities			152,113												146,956												136,721
Total liabilities			1,173,083												1,152,897												1,114,253
Total equity			144,173												145,299												155,805
Total liabilities and equity		$	1,317,256											$	1,298,196											$	1,270,058
Less: Tax-equivalent adjustment(2)							(134	)											(133	)											(148	)
Net interest and dividend income						$	7,878											$	7,834											$	7,607
Net interest rate spread(4)											2.40	%											2.42	%											2.40	%
Net interest margin(5)											2.56	%											2.58	%											2.57	%
Ratio of average interest-earning
assets to average interest-bearing     liabilities											121.65												121.80												122.40

 

 

 

		Year Ended December 31,
		2014												2013
		Average								Avg Yield/				Average								Avg Yield/
		Balance				Interest				Cost				Balance				Interest				Cost
		(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)		$	683,064			$	27,989				4.10	%		$	604,732			$	25,558				4.23	%
Securities(2)			504,532				13,299				2.64				584,029				16,027				2.74
Other investments - at cost			16,597				246				1.48				17,258				93				0.54
Short-term investments(3)			13,749				13				0.09				9,790				9				0.09
Total interest-earning assets			1,217,942				41,547				3.41				1,215,809				41,687				3.43
Total noninterest-earning assets			73,334												69,753
Total assets		$	1,291,276											$	1,285,562
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking		$	40,412				99				0.24			$	46,982				134				0.29
Savings accounts			79,086				80				0.10				87,535				119				0.14
Money market accounts			221,391				846				0.38				196,265				763				0.39
Time certificates of deposit			343,190				4,152				1.21				330,510				4,509				1.36
Total interest-bearing deposits			684,079				5,177								661,292				5,525
Short-term borrowings and long-term debt			315,089				4,746				1.51				327,783				4,765				1.45
Interest-bearing liabilities			999,168				9,923				0.99				989,075				10,290				1.04
Noninterest-bearing deposits			132,923												118,749
Other noninterest-bearing liabilities			11,692												10,373
Total noninterest-bearing liabilities			144,615												129,122
Total liabilities			1,143,783												1,118,197
Total equity			147,493												167,365
Total liabilities and equity		$	1,291,276											$	1,285,562
Less: Tax-equivalent adjustment(2)							(556	)											(656	)
Net interest and dividend income						$	31,068											$	30,741
Net interest rate spread(4)											2.42	%											2.39	%
Net interest margin(5)											2.60	%											2.58	%
Ratio of average interest-earning
assets to average interest-bearing liabilities							121.90												122.92

 

(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.