Westfield Bank releases second quarter earnings report

Date: 8/10/2015

WESTFIELD – Westfield Financial, Inc., operating as Westfield Bank, reported net income of $1.4 million, or $0.08 per diluted share, for the quarter ended June 30, 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, 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 percent, 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 percent, 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 percent, 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.
• 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 million in Federal Home Loan Bank borrowings with a weighted average rate of 2.77 percent 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, 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 percent for the second quarter of 2015, compared to 78.1 percent for the quarter ended March 31.

“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 percent year-over-year, we are demonstrating our commitment to growing our core customer franchise,” President and CEO, James C. Hagan said. “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.”

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 decreased 11 basis points to 2.51 percent, as compared to 2.62 percent 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, decreased 11 basis point to 2.50 percent, as compared to 2.61 percent for the second quarter of 2014. On a sequential-quarter basis, the net interest margin decreased two basis points for the quarter ended June 30, compared to the quarter ended March 31.

Noninterest income increased $206,000 to $1.2 million for the quarter ended June 30, 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.

Noninterest expense was $6.9 million for the quarter ended June 30, 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, 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, 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 percent and 75 percent for the six months ended June 30, 2015 and 2014, respectively.

Total deposits increased $79.1 million, or 9.7 percent, to $897.7 million at June 30, 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 percent, 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.

Shareholders’ equity was $139.8 million at June 30, 2015 and $140.3 million at March 31, 2015, which represented 10.3 percent and 10.6 percent 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.

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

The allowance for loan losses was $8.3 million at June 30, and $8 million at March 31, 2015 and June 30, 2014, representing 1.09 percent, 1.10 percent and 1.17 percent of total loans, respectively. This represents 103.5 percent, 96.3 percent and 248.6 percent of nonperforming loans at June 30, 2015, March 31, 2015 and June 30, 2014, respectively.