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EX-32.1 - Western New England Bancorp, Inc.v164929_ex32-1.htm
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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:
   </