Western New England Bancorp, Inc. - FORM 10-Q

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.

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.

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.

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.

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.

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.

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.

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	)

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

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

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.

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:	</

Western New England Bancorp, Inc. - FORM 10-Q - November 5, 2009

Attached files