Attached files
file | filename |
---|---|
EX-32.1 - Western New England Bancorp, Inc. | v164929_ex32-1.htm |
EX-31.1 - Western New England Bancorp, Inc. | v164929_ex31-1.htm |
EX-31.2 - Western New England Bancorp, Inc. | v164929_ex31-2.htm |
EX-32.2 - Western New England Bancorp, Inc. | v164929_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2009
Commission
file number 001-16767
Westfield
Financial, Inc.
(Exact
name of registrant as specified in its charter)
Massachusetts
|
73-1627673
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
141
Elm Street, Westfield, Massachusetts 01086
(Address
of principal executive offices)
(Zip
Code)
(413)
568-1911
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
£
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files.) Yes £ No
£.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
Large
accelerated filer £
|
Accelerated
filer x
|
|
Non-accelerated
filer £
|
Smaller
reporting company £
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £ No
x
At
November 2, 2009, the registrant had 30,497,498 shares of common stock, $0.01
par value, issued and outstanding.
TABLE
OF CONTENTS
Page
|
||
PART I – FINANCIAL
INFORMATION
|
||
Item 1.
|
Financial
Statements of Westfield Financial, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheets (Unaudited) – September 30, 2009 and December 31,
2008
|
2
|
|
Consolidated
Statements of Income (Unaudited) – nine months ended
|
3
|
|
September
30, 2009 and 2008
|
||
Consolidated
Statements of Changes in Stockholders’ Equity and
Comprehensive
|
||
Income
(Unaudited) – Nine Months ended September 30, 2009 and
2008
|
4
|
|
Consolidated
Statements of Cash Flows (Unaudited) – Nine Months ended
|
||
September
30, 2009 and 2008
|
5
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
23
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
35
|
Item 4.
|
Controls
and Procedures
|
36
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
37
|
Item 1A.
|
Risk
Factors
|
37
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
37
|
Item
3.
|
Defaults
upon Senior Securities
|
38
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
38
|
Item
5.
|
Other
Information
|
38
|
Item
6.
|
Exhibits
|
38
|
Signatures
|
39
|
|
Exhibits
|
FORWARD
– LOOKING STATEMENTS
This Quarterly Report on Form 10-Q
contains “forward-looking statements.” These forward-looking
statements are made in good faith pursuant to the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995. The words
“may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,”
“expect,” “intend,” “plan” and similar expressions are intended to identify
forward-looking statements. These forward-looking statements may be
subject to significant known and unknown risks, uncertainties and other factors,
including, but not limited to, changes in the real estate market or local
economy, changes in interest rates, changes in laws and regulations to which we
are subject, and competition in our primary market area.
Although
we believe that the expectations reflected in such forward-looking statements
are reasonable, actual results may differ materially from the results discussed
in these forward-looking statements. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. Westfield Financial undertakes no obligation to
republish revised forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated
events.
1
PART
I
ITEM
1: FINANCIAL STATEMENTS
WESTFIELD
FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS - UNAUDITED
(Dollars
in thousands)
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ | 12,313 | $ | 11,525 | ||||
Federal
funds sold
|
11,217 | 42,338 | ||||||
Interest-bearing
deposits and other short-term investments
|
1,075 | 2,670 | ||||||
Cash
and cash equivalents
|
24,605 | 56,533 | ||||||
SECURITIES:
|
||||||||
Available
for sale - at fair value
|
19,759 | 24,396 | ||||||
Held
to Maturity - at amortized cost (fair value of $73,297 at September 30,
2009, and $82,491 at December 31, 2008)
|
69,272 | 79,303 | ||||||
MORTGAGE-BACKED
SECURITIES:
|
||||||||
Available
for sale - at fair value
|
301,597 | 233,747 | ||||||
Held
to maturity - at amortized cost (fair value $243,121 at September
30, 2009, and $168,716 at December 31, 2008)
|
237,580 | 168,332 | ||||||
FEDERAL
HOME LOAN BANK OF BOSTON AND OTHER
|
||||||||
RESTRICTED
STOCK - AT COST
|
10,003 | 8,456 | ||||||
LOANS
- Net of allowance for loan losses of $7,857 at September 30, 2009, and
$8,796 at December 31, 2008
|
466,808 | 472,135 | ||||||
PREMISES
AND EQUIPMENT, Net
|
12,414 | 12,066 | ||||||
ACCRUED
INTEREST RECEIVABLE
|
5,195 | 5,261 | ||||||
BANK-OWNED
LIFE INSURANCE
|
37,184 | 36,100 | ||||||
DEFERRED
TAX ASSET, Net
|
6,859 | 10,521 | ||||||
DUE
FROM BROKER FOR SECURITIES SOLD
|
66,532 | - | ||||||
OTHER
ASSETS
|
3,829 | 2,206 | ||||||
TOTAL
ASSETS
|
$ | 1,261,637 | $ | 1,109,056 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
LIABILITIES:
|
||||||||
DEPOSITS:
|
||||||||
Noninterest-bearing
|
$ | 81,070 | $ | 50,860 | ||||
Interest-bearing
|
573,120 | 537,169 | ||||||
Total
deposits
|
654,190 | 588,029 | ||||||
SHORT-TERM
BORROWINGS
|
55,843 | 49,824 | ||||||
LONG-TERM
DEBT
|
218,813 | 173,300 | ||||||
DUE
TO BROKER FOR SECURITIES PURCHASED
|
66,123 | 27,603 | ||||||
OTHER
LIABILITIES
|
9,491 | 10,381 | ||||||
TOTAL
LIABILITIES
|
1,004,460 | 849,137 | ||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Preferred
stock – $0.01 par value 5,000,000 shares authorized. None
outstanding at September 30, 2009 and December 31, 2008.
|
- | - | ||||||
Common
stock - $0.01 par value, 75,000,000 shares authorized, 30,608,713 shares
issued and outstanding at September 30, 2009; 31,307,881 shares
issued and outstanding at December 31, 2008
|
306 | 313 | ||||||
Additional
paid-in capital
|
199,709 | 204,866 | ||||||
Unearned
compensation – ESOP
|
(10,453 | ) | (10,913 | ) | ||||
Unearned
compensation - Equity Incentive Plan
|
(3,469 | ) | (4,337 | ) | ||||
Retained
earnings
|
73,220 | 78,898 | ||||||
Accumulated
other comprehensive loss
|
(2,136 | ) | (8,908 | ) | ||||
Total
stockholders' equity
|
257,177 | 259,919 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,261,637 | $ | 1,109,056 |
See
accompanying notes to unaudited consolidated financial statements.
2
WESTFIELD
FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME – UNAUDITED
(Dollars
in thousands, except per share data)
Three Months
|
Nine Months
|
|||||||||||||||
Ended September 30,
|
Ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
INTEREST
AND DIVIDEND INCOME:
|
||||||||||||||||
Debt
securities, taxable
|
$ | 6,370 | $ | 5,952 | $ | 18,666 | $ | 18,539 | ||||||||
Residential
and commercial real estate loans
|
4,629 | 4,711 | 13,828 | 13,952 | ||||||||||||
Commercial
and industrial loans
|
1,809 | 2,133 | 5,390 | 6,057 | ||||||||||||
Debt
securities, tax-exempt
|
367 | 351 | 1,102 | 1,030 | ||||||||||||
Consumer
loans
|
65 | 78 | 203 | 247 | ||||||||||||
Equity
securities
|
56 | 121 | 176 | 452 | ||||||||||||
Federal
funds sold and other short-term investments
|
2 | 158 | 11 | 544 | ||||||||||||
Total
interest and dividend income
|
13,298 | 13,504 | 39,376 | 40,821 | ||||||||||||
INTEREST
EXPENSE:
|
||||||||||||||||
Deposits
|
3,221 | 3,551 | 9,785 | 11,686 | ||||||||||||
Short-term
borrowings
|
78 | 204 | 271 | 768 | ||||||||||||
Long-term
debt
|
1,757 | 1,650 | 5,251 | 4,606 | ||||||||||||
Total
interest expense
|
5,056 | 5,405 | 15,307 | 17,060 | ||||||||||||
Net
interest and dividend income
|
8,242 | 8,099 | 24,069 | 23,761 | ||||||||||||
PROVISION
FOR LOAN LOSSES
|
620 | 275 | 2,360 | 690 | ||||||||||||
Net
interest and dividend income after provision for loan
losses
|
7,622 | 7,824 | 21,709 | 23,071 | ||||||||||||
NONINTEREST
INCOME (LOSS):
|
||||||||||||||||
Total
other-than-temporary impairment losses on securities
|
(1,343 | ) | (651 | ) | (1,343 | ) | (961 | ) | ||||||||
Portion
of other-than-temporary impairment losses recognized in accumulated other
comprehensive loss
|
1,157 | - | 1,157 | - | ||||||||||||
Net
other-than-temporary impairment losses recognized in
income
|
(186 | ) | (651 | ) | (186 | ) | (961 | ) | ||||||||
Service
charges and fees
|
580 | 605 | 2,023 | 1,768 | ||||||||||||
Income
from bank-owned life insurance
|
371 | 359 | 1,084 | 1,002 | ||||||||||||
(Loss)
gain on sales of securities, net
|
(774 | ) | 486 | (565 | ) | 805 | ||||||||||
Loss
on disposal of premises and equipment, net
|
- | - | (8 | ) | - | |||||||||||
Loss
on prepayment of borrowings
|
- | - | (142 | ) | - | |||||||||||
Loss
on sale of other real estate owned
|
(110 | ) | - | (110 | ) | |||||||||||
Total
noninterest income (loss)
|
(119 | ) | 799 | 2,096 | 2,614 | |||||||||||
NONINTEREST
EXPENSE:
|
||||||||||||||||
Salaries
and employees benefits
|
3,817 | 3,662 | 11,800 | 10,759 | ||||||||||||
Occupancy
|
632 | 593 | 1,948 | 1,819 | ||||||||||||
Professional
fees
|
290 | 356 | 1,210 | 1,203 | ||||||||||||
Computer
operations
|
442 | 422 | 1,299 | 1,276 | ||||||||||||
Stationery,
supplies and postage
|
119 | 111 | 308 | 360 | ||||||||||||
FDIC
insurance assessment
|
102 | 24 | 950 | 65 | ||||||||||||
Other
|
662 | 615 | 1,966 | 1,818 | ||||||||||||
Total
noninterest expense
|
6,064 | 5,783 | 19,481 | 17,300 | ||||||||||||
INCOME
BEFORE INCOME TAXES
|
1,439 | 2,840 | 4,324 | 8,385 | ||||||||||||
INCOME
TAXES
|
197 | 793 | 804 | 2,357 | ||||||||||||
NET
INCOME
|
$ | 1,242 | $ | 2,047 | $ | 3,520 | $ | 6,028 | ||||||||
EARNINGS
PER COMMON SHARE:
|
||||||||||||||||
Basic
earnings per share
|
$ | 0.04 | $ | 0.07 | $ | 0.12 | $ | 0.20 | ||||||||
Weighted
average shares outstanding (1)
|
29,330,638 | 29,719,961 | 29,522,327 | 29,877,284 | ||||||||||||
Diluted
earnings per share
|
$ | 0.04 | $ | 0.07 | $ | 0.12 | $ | 0.20 | ||||||||
Weighted
average diluted shares outstanding (1)
|
29,591,706 | 30,019,924 | 29,791,421 | 30,246,927 |
(1)
|
Weighted-average
shares outstanding for 2008 have been adjusted retrospectively for
restricted shares that were determined to be “participating” with
Financial Accounting Standards Board ASC 260, “Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating
Securities.”
|
See
accompanying notes to unaudited consolidated financial statements.
3
WESTFIELD
FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME-
UNAUDITED
NINE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Dollars
in thousands, except share data)
Common Stock
|
||||||||||||||||||||||||||||||||
Shares
|
Par
Value
|
Additional
Paid-in
Capital
|
Unearned
Compensation
-
ESOP
|
Unearned
Compensation
-
Equity
Incentive
Plan
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Total
|
|||||||||||||||||||||||||
BALANCE
AT DECEMBER 31, 2008
|
31,307,881 | $ | 313 | $ | 204,866 | $ | (10,913 | ) | $ | (4,337 | ) | $ | 78,898 | $ | (8,908 | ) | $ | 259,919 | ||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | - | 3,520 | - | 3,520 | ||||||||||||||||||||||||
Noncredit
portion of other-than-temporary impairment losses on available-for-sale
securities, net of reclassification and tax effects
|
- | - | - | - | - | - | (764 | ) | (764 | ) | ||||||||||||||||||||||
Net
unrealized gains on securities available for sale arising during the
period, net reclassification adjustment and tax effects
|
- | - | - | - | - | - | 7,474 | 7.474 | ||||||||||||||||||||||||
Change
in pension gains or losses and transition assets, net of
tax
|
- | - | - | - | - | - | 62 | 62 | ||||||||||||||||||||||||
Total
comprehensive income
|
10.292 | |||||||||||||||||||||||||||||||
Common
stock held by ESOP committed to be released (91,493
shares)
|
- | - | 183 | 460 | - | - | - | 643 | ||||||||||||||||||||||||
Share-based
compensation - stock options
|
- | - | 703 | - | - | - | - | 703 | ||||||||||||||||||||||||
Share-based
compensation - equity incentive plan
|
- | - | - | - | 1,002 | - | - | 1.002 | ||||||||||||||||||||||||
Excess
tax benefits from equity incentive plan
|
- | - | 43 | - | - | - | - | 43 | ||||||||||||||||||||||||
Common
stock repurchased
|
(758,889 | ) | (8 | ) | (6,897 | ) | - | - | - | - | (6.905 | ) | ||||||||||||||||||||
Issuance
of common stock in connection with stock option exercises
|
59,721 | 1 | 574 | - | - | (313 | ) | - | 262 | |||||||||||||||||||||||
Issuance
of common stock in connection with equity incentive plan
|
- | - | 138 | - | (138 | ) | - | - | - | |||||||||||||||||||||||
Forfeiture
of common stock in connection with equity incentive plan
|
- | - | (4 | ) | - | 4 | - | - | - | |||||||||||||||||||||||
Excess
tax benefits in connection with stock option exercises
|
- | - | 103 | - | - | - | - | 103 | ||||||||||||||||||||||||
Cash
dividends declared ($0.30 per share)
|
- | - | - | - | - | (8,885 | ) | - | (8.885 | ) | ||||||||||||||||||||||
BALANCE
AT SEPTEMBER 30, 2009
|
30,608,713 | $ | 306 | $ | 199,709 | $ | (10,453 | ) | $ | (3,469 | ) | $ | 73,220 | $ | (2,136 | ) | $ | 257,177 | ||||||||||||||
BALANCE
AT DECEMBER 31, 2007
|
31,933,549 | $ | 319 | $ | 209,497 | $ | (11,542 | ) | $ | (5,493 | ) | $ | 92,702 | $ | 1,049 | $ | 286,532 | |||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | - | 6,028 | - | 6,028 | ||||||||||||||||||||||||
Net
unrealized losses on securities available for sale arising during the
period, net reclassification adjustment and tax effects
|
- | - | - | - | - | - | (4,652 | ) | (4,652 | ) | ||||||||||||||||||||||
Total
comprehensive income
|
1,376 | |||||||||||||||||||||||||||||||
Common
stock held by ESOP committed to be released (93,947
shares)
|
- | - | 216 | 472 | - | - | - | 688 | ||||||||||||||||||||||||
Share-based
compensation - stock options
|
- | - | 521 | - | - | - | - | 521 | ||||||||||||||||||||||||
Share-based
compensation - equity incentive plan
|
- | - | - | - | 752 | - | - | 752 | ||||||||||||||||||||||||
Common
stock repurchased
|
(983,471 | ) | (10 | ) | (9,769 | ) | - | - | - | - | (9,779 | ) | ||||||||||||||||||||
Issuance
of common stock in connection with stock option exercises
|
433,110 | 4 | 4,447 | - | - | (2,550 | ) | - | 1,901 | |||||||||||||||||||||||
Excess
tax benefits in connection with stock option exercises
|
- | - | 345 | - | - | - | - | 345 | ||||||||||||||||||||||||
Cash
dividends declared ($0.30 per share)
|
- | - | - | - | - | (9,025 | ) | - | (9,025 | ) | ||||||||||||||||||||||
BALANCE
AT SEPTEMBER 30, 2008
|
31,383,188 | $ | 313 | $ | 205,257 | $ | (11,070 | ) | $ | (4,741 | ) | $ | 87,155 | $ | (3,603 | ) | $ | 273,311 |
See the
accompanying notes to unaudited consolidated financial
statements.
4
WESTFIELD
FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars
in thousands)
Nine Months Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
income
|
$ | 3,520 | $ | 6,028 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Provision
for loan losses
|
2,360 | 690 | ||||||
Depreciation
and amortization of premises and equipment
|
929 | 889 | ||||||
Net
amortization of premiums and discounts on securities, mortgage-backed
securities and mortgage loans
|
1,098 | 140 | ||||||
Share-based
compensation expense
|
1,705 | 1,273 | ||||||
Amortization
of ESOP expense
|
643 | 688 | ||||||
Excess
tax benefits from equity incentive plan
|
(43 | ) | - | |||||
Excess
tax benefits in connection with stock option exercises
|
(103 | ) | (345 | ) | ||||
Net
losses (gains) on sales of securities
|
565 | (805 | ) | |||||
Other-than-temporary
impairment losses of securities
|
186 | 961 | ||||||
Write-downs
of other real estate owned
|
17 | - | ||||||
Loss
on sale of other real estate owned
|
110 | - | ||||||
Loss
on disposal of premises and equipment, net
|
8 | - | ||||||
Loss
on prepayment of borrowings
|
142 | - | ||||||
Deferred
income tax benefit
|
(188 | ) | (135 | ) | ||||
Income
from bank-owned life insurance
|
(1.084 | ) | (1,002 | ) | ||||
Changes
in assets and liabilities:
|
||||||||
Accrued
interest receivable
|
(107 | ) | 643 | |||||
Other
assets
|
(1,623 | ) | (1,006 | ) | ||||
Other
liabilities
|
(650 | ) | (1,152 | ) | ||||
Net
cash provided by operating activities
|
7,485 | 6,867 | ||||||
INVESTING
ACTIVITIES:
|
||||||||
Securities,
held to maturity:
|
||||||||
Purchases
|
(10,112 | ) | (1,094 | ) | ||||
Proceeds
from calls, maturities, and principal collections
|
20,090 | 23,000 | ||||||
Securities,
available for sale:
|
||||||||
Purchases
|
(433 | ) | (17,291 | ) | ||||
Proceeds
from sales
|
5,107 | 15,242 | ||||||
Proceeds
from calls, maturities, and principal collections
|
154 | 14,992 | ||||||
Mortgage-backed
securities, held to maturity:
|
||||||||
Purchases
|
(113,622 | ) | (23,726 | ) | ||||
Principal
collections
|
43,845 | 28,091 | ||||||
Mortgage-backed
securities, available for sale:
|
||||||||
Purchases
|
(174,202 | ) | (80,114 | ) | ||||
Proceeds
from sales
|
39,148 | 43,802 | ||||||
Principal
collections
|
48,479 | 35,278 | ||||||
Purchase
of residential mortgages
|
(14,521 | ) | (1,366 | ) | ||||
Net
other decrease (increase) in loans
|
17,169 | (41,233 | ) | |||||
Purchase
of Federal Home Loan Bank of Boston stock
|
(1,547 | ) | (936 | ) | ||||
Proceeds
from sale of other real estate owned
|
148 | - | ||||||
Purchases
of premises and equipment
|
(1,285 | ) | (335 | ) | ||||
Purchase
of bank-owned life insurance
|
- | (2,000 | ) | |||||
Net
cash used in investing activities
|
(141,582 | ) | (7,457 | ) | ||||
FINANCING
ACTIVITIES:
|
||||||||
Net
increase (decrease) in deposits
|
66,161 | (16,638 | ) | |||||
Net
change in short-term borrowings
|
6,019 | 1,425 | ||||||
Repayment
of long-term debt
|
(45,142 | ) | (15,000 | ) | ||||
Proceeds
from long-term debt
|
90,513 | 78,500 | ||||||
Cash
dividends paid
|
(8,885 | ) | (9,025 | ) | ||||
Common
stock repurchased
|
(6,905 | ) | (9,779 | ) | ||||
Issuance
of common stock in connection with stock option exercises
|
262 | 1,901 | ||||||
Excess
tax benefits in connection with equity incentive plan
|
43 | - | ||||||
Excess
tax benefits in connection with stock option exercises
|
103 | 345 | ||||||
Net
cash provided by financing activities
|
102,169 | 31,729 | ||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS:
|
(31,928 | ) | 31,139 | |||||
Beginning
of period
|
56,533 | 37,623 | ||||||
End
of period
|
$ | 24,605 | $ | 68,762 | ||||
Supplemental
cash flow information:
|
||||||||
Due
to broker
|
$ | 66,123 | $ | - | ||||
Due
from broker
|
66,532 | - | ||||||
Transfer
of loans to other real estate owned
|
275 | - | ||||||
Interest
paid
|
15,287 | 17,077 | ||||||
Taxes
paid
|
1,761 | 2,880 |
See the
accompanying notes to unaudited consolidated financial
statements.
5
WESTFIELD
FINANCIAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations –
Westfield Financial, Inc. (the “Company” or “Westfield Financial”) is the
bank holding company for Westfield Bank, a federally-chartered stock savings
bank.
Westfield
Bank’s deposits are insured to the limits specified by the Federal Deposit
Insurance Corporation (“FDIC”). Westfield Bank operates ten branches
in Western Massachusetts. Westfield Bank’s primary source of revenue
is earnings on loans to small and middle-market businesses and to residential
property homeowners.
Elm
Street Securities Corporation and WFD Securities Corporation,
Massachusetts-chartered security corporations, were formed by Westfield
Financial for the primary purpose of holding qualified securities.
Principles of
Consolidation – The consolidated financial statements include the
accounts of Westfield Financial, Westfield Bank, Elm Street Securities
Corporation, and WFD Securities Corporation. All material
intercompany balances and transactions have been eliminated in
consolidation.
Estimates
– The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
(“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of income and expenses for each. Actual results
could differ from those estimates. Estimates that are particularly
susceptible to significant change in the near-term relate to the determination
of the allowance for loan losses, other-than-temporary impairment of securities,
and the valuation of deferred tax assets.
Basis of
Presentation – In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of Westfield
Financial’s financial condition as of September 30, 2009, and the results of
operations, changes in stockholders’ equity and cash flows for the interim
periods presented. The results of operations for the three and nine
months ended September 30, 2009 are not necessarily indicative of the results of
operations for the year ending December 31, 2009. Certain information
and disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
These
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements as of and for the year ended
December 31, 2008.
Reclassifications
- Certain amounts in the prior period financial statements have been
reclassified to conform to the current year presentation.
6
2. EARNINGS
PER SHARE
Basic
earnings per share represent income available to shareholders divided by the
weighted average number of common shares outstanding during the
period. Diluted earnings per share reflect additional common shares
that would have been outstanding if dilutive potential shares had been issued,
as well as any adjustment to income that would result from the assumed
issuance. Potential common shares that may be issued by Westfield
Financial relate solely to outstanding stock awards and options and are
determined using the treasury stock method.
Earnings
per common share for the three and nine months ended September 30, 2009 and 2008
have been computed based on the following:
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share data)
|
||||||||||||||||
Net
income applicable to common stock
|
$ | 1,242 | $ | 2,047 | $ | 3,520 | $ | 6,028 | ||||||||
Average
number of common shares issued
|
30,888 | 31,383 | 31,103 | 31,564 | ||||||||||||
Less:
Average unallocated ESOP Shares
|
(1,506 | ) | (1,598 | ) | (1,528 | ) | (1,622 | ) | ||||||||
Less:
Average ungranted equity incentive plan shares
|
(51 | ) | (65 | ) | (53 | ) | (65 | ) | ||||||||
Average
number of common shares outstanding used to calculate basic earnings per
common share (1)
|
29,331
|
29,720
|
29,522
|
29,877
|
||||||||||||
Effect
of dilutive stock options
|
261 | 300 | 269 | 370 | ||||||||||||
Average
number of common shares outstanding used to calculate diluted earnings per
common share
|
29,592 | 30,020 | 29,791 | 30,247 | ||||||||||||
Basic
earnings per share
|
$ | 0.04 | $ | 0.07 | $ | 0.12 | $ | 0.20 | ||||||||
Diluted
earnings per share
|
$ | 0.04 | $ | 0.07 | $ | 0.12 | $ | 0.20 |
(1)
|
Weighted-average
shares outstanding for 2008 have been adjusted retrospectively for
restricted shares that were determined to be
“participating” in accordance with Financial Accounting Standards Board
ASC 260, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating
Securities.”
|
Stock
options that would have an antidilutive effect on diluted earnings per share are
excluded from the calculation. At September 30, 2009 and 2008,
1,538,357 and 1,501,857 shares were antidilutive, respectively.
7
3. COMPREHENSIVE
INCOME/LOSS
Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Although certain changes in assets and
liabilities are reported as a separate component of the equity section of the
balance sheet, such items, along with net income are components of comprehensive
income.
The
components of other comprehensive income (loss) and related tax effects are as
follows:
Nine Months Ended September 30
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Unrealized
holding (losses) gains on available-for-sale securities
|
$ | 12,277 | $ | (6,798 | ) | |||
Reclassification
adjustment for losses (gains) realized in income
|
565 | (805 | ) | |||||
Noncredit
portion of other-than-temporary impairment losses on available-for-sale
securities
|
(1,157 | ) | - | |||||
Net
realized gains (losses)
|
11,685 | (7,603 | ) | |||||
Tax
effect
|
(4,211 | ) | 2,951 | |||||
Net
of tax amount
|
7,474 | (4,652 | ) | |||||
Gains
and losses arising during the periods pertaining to defined benefit
plan
|
103 | - | ||||||
Reclassification
adjustment for transition asset recognized in net periodic benefit cost
pertaining to defined benefit plan
|
(9 | ) | - | |||||
Net
adjustments pertaining to defined benefit plan
|
94 | - | ||||||
Tax
Effect
|
(32 | ) | - | |||||
Net-of-tax
amount
|
62 | - | ||||||
Net
accumulated other comprehensive (loss) income
|
$ | 7,536 | $ | (4,652 | ) |
The
components of accumulated other comprehensive income (loss) included in
stockholders’ equity are as follows:
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Net
unrealized gain (loss) on securities available-for-sale
|
$ | 772 | $ | (10,913 | ) | |||
Tax
effect
|
(179 | ) | 4,032 | |||||
Net-of-tax
amount
|
593 | (6,881 | ) | |||||
Noncredit
portion of other-than-temporary impairment losses on available-for-sale
securities
|
(1,157 | ) | - | |||||
Tax
effect
|
393 | - | ||||||
Net
of tax amount
|
(764 | ) | - | |||||
Unrecognized
deferred loss pertaining to defined benefit plan
|
(3,035 | ) | (3,138 | ) | ||||
Unrecognized
transition asset pertaining to defined benefit plan
|
59 | 68 | ||||||
Net
components pertaining to defined benefit plan
|
(2,976 | ) | (3,070 | ) | ||||
Tax
Effect
|
1,011 | 1,043 | ||||||
Net-of-tax
amount
|
(1,965 | ) | (2,027 | ) | ||||
Net
accumulated other comprehensive (loss) income
|
$ | (2,136 | ) | $ | (8,908 | ) |
8
4. SECURITIES
Securities
are summarized as follows:
September 30, 2009
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Held
to maturity:
|
||||||||||||||||
Government-sponsored
enterprises
|
$ | 34,903 | $ | 2,013 | $ | - | $ | 36,916 | ||||||||
Municipal
bonds
|
34,369 | 2,012 | - | 36,381 | ||||||||||||
Total
held to maturity
|
69,272 | 4,025 | - | 73,297 | ||||||||||||
Available
for sale:
|
||||||||||||||||
Government-sponsored
enterprises
|
11,000 | 55 | - | 11,055 | ||||||||||||
Municipal
bonds
|
1,956 | 183 | - | 2,139 | ||||||||||||
Equity
securities
|
6,580 | 30 | (45 | ) | 6,565 | |||||||||||
Total
available for sale
|
19,536 | 268 | (45 | ) | 19,759 | |||||||||||
Total
securities
|
$ | 88,808 | $ | 4,293 | $ | (45 | ) | $ | 93,056 |
December 31, 2008
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Held
to maturity:
|
||||||||||||||||
Government-sponsored
enterprises
|
$ | 44,906 | $ | 2,900 | $ | - | $ | 47,806 | ||||||||
Municipal
bonds
|
34,397 | 467 | (179 | ) | 34,685 | |||||||||||
Total
held to maturity
|
79,303 | 3,367 | (179 | ) | 82,491 | |||||||||||
Available
for sale:
|
||||||||||||||||
Government-sponsored
enterprises
|
16,018 | 281 | - | 16,299 | ||||||||||||
Municipal
bonds
|
1,957 | 27 | (14 | ) | 1,970 | |||||||||||
Equity
securities
|
6,301 | - | (174 | ) | 6,127 | |||||||||||
Total
available for sale
|
24,276 | 308 | (188 | ) | 24,396 | |||||||||||
Total
securities
|
$ | 103,579 | $ | 3,675 | $ | (367 | ) | $ | 106,887 |
9
Information
pertaining to securities with gross unrealized losses at September 30, 2009 and
December 31, 2008, aggregated by investment category and length of time that
individual securities have been in a continuous loss position,
follows:
September 30, 2009
|
||||||||||||||||
Less Than Twelve Months
|
Over Twelve Months
|
|||||||||||||||
Gross
Unrealized
Losses
|
Fair Value
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Available
for sale:
|
||||||||||||||||
Equity
securities
|
$ | - | $ | - | $ | (45 | ) | $ | 1,470 | |||||||
Total
available for sale
|
- | - | (45 | ) | 1,470 | |||||||||||
Total
|
$ | - | $ | - | $ | (45 | ) | $ | 1,470 |
December 31, 2008
|
||||||||||||||||
Less Than Twelve Months
|
Over Twelve Months
|
|||||||||||||||
Gross
Unrealized
Losses
|
Fair Value
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Held
to maturity:
|
||||||||||||||||
Municipal
bonds
|
$ | (155 | ) | $ | 6,677 | $ | (24 | ) | $ | 1,585 | ||||||
Total
held to maturity
|
(155 | ) | 6,667 | (24 | ) | 1,585 | ||||||||||
Available
for sale:
|
||||||||||||||||
Municipal
bonds
|
(14 | ) | 1,093 | - | - | |||||||||||
Equity
securities
|
- | - | (174 | ) | 3,842 | |||||||||||
Total
available for sale
|
(14 | ) | 1,093 | (174 | ) | 3,842 | ||||||||||
Total
|
$ | (169 | ) | $ | 7,770 | $ | (198 | ) | $ | 5,427 |
10
At
September 30, 2009, one equity security had a gross unrealized loss with
aggregate depreciation of 3.0% from Westfield Financial’s cost basis existing
for greater than twelve months and was principally related to fluctuations in
interest rates. This loss relates to a mutual fund which invests
primarily in short-term debt instruments and adjustable rate mortgage-backed
securities. Because this loss was the result of fluctuations in
interest rates, and Westfield Financial does not intend to sell the security and
it is more likely than not that it will not be required to sell it prior to the
recovery of its amortized cost basis the loss is deemed temporary. At
September 30, 2009, no securities had gross unrealized losses from Westfield
Financial’s amortized cost basis existing for less than twelve
months.
Westfield
Financial recorded write-downs on preferred stock issued by Freddie Mac of
$651,000 and $961,000 during the three and nine months ended September 30, 2008,
respectively. Freddie Mac was placed into conservatorship by the
United States Treasury in September 2008. Westfield Financial’s book
value remaining on preferred stock issued by Freddie Mac was $39,000 at
September 30, 2009. Westfield Financial recorded no write-downs on
these securities during the three and nine months ended September 30,
2009.
The
amortized cost and fair value of debt securities at September 30, 2009, by
maturity, are shown below. Actual maturities may differ from
contractual maturities because certain issuers have the right to call or repay
obligations.
September
30, 2009
|
||||||||
Amortized
Cost
|
Fair
Value
|
|||||||
(In
thousands)
|
||||||||
Held
to maturity:
|
||||||||
Due
in one year or less
|
$ | 5,068 | $ | 5,083 | ||||
Due
after one year through five years
|
17,934 | 18,820 | ||||||
Due
after five years through ten years
|
33,631 | 35,987 | ||||||
Due
after ten years
|
12,639 | 13,407 | ||||||
Total
held to maturity
|
$ | 69,272 | $ | 73,297 | ||||
Available
for sale:
|
||||||||
Due
after five years through ten years
|
$ | 1,391 | $ | 1,521 | ||||
Due
after ten years
|
11,565 | 11,673 | ||||||
Total
available for sale
|
$ | 12,956 | $ | 13,194 |
Proceeds
from the sale of securities available for sale amounted to $5.1 million and
$15.2 million for the nine months ended September 30, 2009 and 2008,
respectively.
Gross
realized gains of $89,000 and $231,000 and gross realized losses of $2,000 and
$12,000 were recorded on the sales of securities during the nine months ended
September 30, 2009 and 2008, respectively. No gains or losses were
recorded on the sales of securities during the three months ended September 30,
2009 and 2008. Westfield Financial recorded gross losses of $651,000
and $961,000 due to other-than-temporary impairment in value of securities
during the three and nine months ended September 30, 2008,
respectively. Westfield Financial recorded no impairment losses on
debt securities during the three and nine months ended September 30,
2009.
At
September 30, 2009 and December 31, 2008, one security with a carrying value of
$4.9 million was pledged as collateral to the Federal Reserve Bank of Boston to
secure public deposits.
11
5.
|
MORTGAGE-BACKED
SECURITIES
|
Mortgage-backed
securities are summarized as follows:
September 30, 2009
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Held
to maturity:
|
||||||||||||||||
Fannie
Mae
|
$ | 114,751 | $ | 3,297 | $ | (35 | ) | $ | 118,013 | |||||||
Freddie
Mac
|
77,545 | 2,800 | (30 | ) | 80,315 | |||||||||||
Ginnie
Mae
|
6,903 | 52 | - | 6,955 | ||||||||||||
Collateralized
mortgage obligations
|
38,381 | 71 | (614 | ) | 37,838 | |||||||||||
Total
held to maturity
|
237,580 | 6,220 | (679 | ) | 243,121 | |||||||||||
Available
for sale:
|
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