Westfield Financial Inc (WFD, Financial) filed Quarterly Report for the period ended 2012-06-30.
Westfield Financial, Inc. has a market cap of $202.2 million; its shares were traded at around $7.72 with a P/E ratio of 30.4 and P/S ratio of 4.1. The dividend yield of Westfield Financial, Inc. stocks is 3.2%. Westfield Financial, Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Westfield Financial, Inc. the business predictability rank of 3-star.
Provision for Loan Losses The amount that we provided for loan losses during the three months ended June 30, 2012 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include an increase in residential real estate loans, partially offset by a decrease in commercial and industrial loans and a decrease in net loan charge-offs. After evaluating these factors, we provided $260,000 for loan losses for the three months ended June 30, 2012, compared to $175,000 for the same period in 2011. The allowance was $8.1 million at June 30, 2012 and $7.8 million at March 31, 2012. The allowance for loan losses was 1.38% of total loans at June 30, 2012 and 1.40% at March 31, 2012. Residential real estate loans increased $21.6 million to $222.8 million compared to March 31, 2012. We consider these types of loans to contain less credit risk and market risk than both commercial and industrial and commercial real estate loans. Commercial and industrial loans decreased $3.7 million to $123.7 million at June 30, 2012, from $120.0 million at March 31, 2012. Commercial real estate loans decreased $400,000 to $234.3 million at June 30, 2012, from $233.9 million at March 31, 2012. A summary of our provision for loan losses by loan segment is listed in Note 5 of the accompanying consolidated financial statements. Net recoveries were $2,000 for the three months ended June 30, 2012. This was comprised of charge-offs of $47,000 for the three months ended June 30, 2012, offset by recoveries of $49,000 for the same period. Net charge-offs were $101,000 for the three months ended June 30, 2011. This was comprised of charge-offs of $257,000 for the three months ended June 30, 2011, offset by recoveries of $156,000. Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment. Noninterest Income Noninterest income decreased $46,000 to $901,000 for the three months ended June 30, 2012, compared to $947,000 for the same period in 2011. Income from BOLI decreased $105,000 to $283,000 for the three month ended June 30, 2012, compared to $388,000 for the same period in 2011. Management redeemed certain BOLI policies because of a sudden downgrade in the credit ratings of the insurance carrier and the carrier s decision to close out its individual life policies to new sales. The decrease in income from BOLI was primarily the result of a $102,000 charge associated with transferring the policies to a different carrier. The remainder of our BOLI policies are diversified among eight other carriers, all of which have high credit quality. This decrease was partially offset by a $51,000 increase in net gains on the sales of securities to $97,000, compared to $46,000 the same period in 2011. Noninterest Expense Noninterest expense increased $400,000 to $6.8 million for the three months ended June 30, 2012, compared to $6.4 million for the same period in 2011. Salaries and benefits increased $368,000 to $4.1 million for the three months ended June 30, 2012. This was mainly the result of new personnel, particularly in the commercial lending and compliance divisions, along with normal increases in this category. Income Taxes For the three months ended June 30, 2012, we had a tax provision of $561,000 as compared to $503,000 for the same period in 2011. The increase was primarily due to higher pre-tax earnings for the three months ended June 30, 2012. The effective tax rate was 36.5% for the three months ended June 30, 2012, and 24.3% for the same period in 2011. The change in effective tax rate from June 30, 2011, is primarily due to the redemption of BOLI which resulted in an additional income tax provision of $160,000, or 10.4% of income before income taxes for the quarter ended June 30, 2012. 32
Noninterest income decreased $46,000 to $901,000 for the three months ended June 30, 2012, compared to $947,000 for the same period in 2011. Income from BOLI decreased $105,000 to $283,000 for the three month ended June 30, 2012, compared to $388,000 for the same period in 2011. Management redeemed certain BOLI policies because of a sudden downgrade in the credit ratings of the insurance carrier and the carrier s decision to close out its individual life policies to new sales. The decrease in income from BOLI was primarily the result of a $102,000 charge associated with transferring the policies to a different carrier. The remainder of our BOLI policies are diversified among eight other carriers, all of which have high credit quality. This decrease was partially offset by a $51,000 increase in net gains on the sales of securities to $97,000, compared to $46,000 the same period in 2011.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 General Net income was $3.3 million, or $0.13 per diluted share, for the six months ended June 30, 2012, as compared to $2.9 million, or $0.11 per diluted share, for the same period in 2011. Net interest and dividend income was $15.1 million for the six months ended June 30, 2012, and $15.4 million for the same period in 2011. Net Interest and Dividend Income The following tables set forth the information relating to our average balance and net interest income for the six months ended June 30, 2012 and 2011, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets. 33
Provision for Loan Losses The amount that we provided for loan losses during the six months ended June 30, 2012, was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include an increase in residential real estate loans and commercial real estate loans, partially offset by a decrease in commercial and industrial loans and net loan charge-offs. After evaluating these factors, we provided $480,000 for loan losses for the six months ended June 30, 2012, compared to $514,000 for the same period in 2011. The allowance was $8.1 million at June 30, 2012, and $7.8 million at December 31, 2011. The allowance for loan losses was 1.38% of total loans at June 30, 2012, and 1.40% at December 31, 2011. Residential real estate loans increased $30.3 million to $222.8 million compared to December 31, 2011. We consider these types of loans to contain less credit risk and market risk than both commercial and industrial and commercial real estate loans. Commercial real estate loans increased $1.8 million to $234.3 million at June 30, 2012, from $232.5 million at December 31, 2011. Commercial and industrial loans decreased $2.0 million to $123.7 million at June 30, 2012, from $125.7 million at December 31, 2011. A summary of our provision for loan losses by loan segment is listed in Note 5 of the accompanying consolidated financial statements. Net charge-offs were $179,000 for the six months ended June 30, 2012. This was comprised of charge-offs of $246,000, partially offset by recoveries of $67,000 for the same period. Net charge-offs were $375,000 for the six months ended June 30, 2011. This was comprised of charge-offs of $616,000, partially offset by recoveries of $241,000. Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment. Noninterest Income Noninterest income increased $1.7 million to $3.5 million for the six months ended June 30, 2012, from $1.8 million for the same period in 2011. This was primarily due to $1.7 million in net gains on the sales of securities, compared to $77,000 the same period in 2011. With mortgage rates declining to new lows, we experienced a high level of prepayment activity in its mortgage-backed securities, which negatively affected the yield of the portfolio. In an effort to improve portfolio performance, management sold certain mortgage-backed securities that were prepaying rapidly and were expected to continue to prepay. Rather than receive principal payments back at par value, management sold the securities at a net gain, which created greater economic value for us. Noninterest Expense Noninterest expense increased $704,000 for the six months ended June 30, 2012, to $13.7 million from $13.0 million in the comparable 2011 period. Salaries and benefits increased $691,000 to $8.4 million for the six months ended June 30, 2012. This was mainly the result of new personnel, particularly in the commercial lending and compliance divisions, along with normal increases in this category. Income Taxes For the six months ended June 30, 2012, we had a tax provision of $1.1 million as compared to $790,000 for the same period in 2011. The effective tax rate was 25.4% for the six months ended June 30, 2012, and 21.7% for the same period in 2011. The change in effective tax rate from June 31, 2011, is primarily due to the redemption of BOLI which resulted in an additional income tax provision of $160,000, or 3.6% of income before income taxes for the six months ended June 30, 2012. 36
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Westfield Financial, Inc. has a market cap of $202.2 million; its shares were traded at around $7.72 with a P/E ratio of 30.4 and P/S ratio of 4.1. The dividend yield of Westfield Financial, Inc. stocks is 3.2%. Westfield Financial, Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Westfield Financial, Inc. the business predictability rank of 3-star.
Highlight of Business Operations:
Shareholders equity was $211.4 million and $219.0 million, which represented 16.0% and 17.3% of total assets at June 30, 2012 and December 31, 2011, respectively. The decrease in shareholders equity reflects the repurchase of 1.2 million shares of our common stock at a cost of $8.7 million pursuant to our stock repurchase program, and the payment of regular and special dividends amounting to $5.6 million. This was partially offset by net income of $3.3 million for the six months ended June 30, 2012, increase in other comprehensive income of $1.0 million primarily due to the change in market value of securities, and an increase of $2.4 million related to the recognition of share-based compensation and the exercise of 194,656 stock options. COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 General Net income was $974,000, or $0.04 per diluted share, for the quarter ended June 30, 2012, compared to $1.6 million, or $0.06 per diluted share, for the same period in 2011. Net interest income was $7.7 million for the three months ended June 30, 2012 and 2011, respectively. Net Interest and Dividend Income The following tables set forth the information relating to our average balance and net interest income for the three months ended June 30, 2012 and 2011, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets. 29Provision for Loan Losses The amount that we provided for loan losses during the three months ended June 30, 2012 was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include an increase in residential real estate loans, partially offset by a decrease in commercial and industrial loans and a decrease in net loan charge-offs. After evaluating these factors, we provided $260,000 for loan losses for the three months ended June 30, 2012, compared to $175,000 for the same period in 2011. The allowance was $8.1 million at June 30, 2012 and $7.8 million at March 31, 2012. The allowance for loan losses was 1.38% of total loans at June 30, 2012 and 1.40% at March 31, 2012. Residential real estate loans increased $21.6 million to $222.8 million compared to March 31, 2012. We consider these types of loans to contain less credit risk and market risk than both commercial and industrial and commercial real estate loans. Commercial and industrial loans decreased $3.7 million to $123.7 million at June 30, 2012, from $120.0 million at March 31, 2012. Commercial real estate loans decreased $400,000 to $234.3 million at June 30, 2012, from $233.9 million at March 31, 2012. A summary of our provision for loan losses by loan segment is listed in Note 5 of the accompanying consolidated financial statements. Net recoveries were $2,000 for the three months ended June 30, 2012. This was comprised of charge-offs of $47,000 for the three months ended June 30, 2012, offset by recoveries of $49,000 for the same period. Net charge-offs were $101,000 for the three months ended June 30, 2011. This was comprised of charge-offs of $257,000 for the three months ended June 30, 2011, offset by recoveries of $156,000. Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment. Noninterest Income Noninterest income decreased $46,000 to $901,000 for the three months ended June 30, 2012, compared to $947,000 for the same period in 2011. Income from BOLI decreased $105,000 to $283,000 for the three month ended June 30, 2012, compared to $388,000 for the same period in 2011. Management redeemed certain BOLI policies because of a sudden downgrade in the credit ratings of the insurance carrier and the carrier s decision to close out its individual life policies to new sales. The decrease in income from BOLI was primarily the result of a $102,000 charge associated with transferring the policies to a different carrier. The remainder of our BOLI policies are diversified among eight other carriers, all of which have high credit quality. This decrease was partially offset by a $51,000 increase in net gains on the sales of securities to $97,000, compared to $46,000 the same period in 2011. Noninterest Expense Noninterest expense increased $400,000 to $6.8 million for the three months ended June 30, 2012, compared to $6.4 million for the same period in 2011. Salaries and benefits increased $368,000 to $4.1 million for the three months ended June 30, 2012. This was mainly the result of new personnel, particularly in the commercial lending and compliance divisions, along with normal increases in this category. Income Taxes For the three months ended June 30, 2012, we had a tax provision of $561,000 as compared to $503,000 for the same period in 2011. The increase was primarily due to higher pre-tax earnings for the three months ended June 30, 2012. The effective tax rate was 36.5% for the three months ended June 30, 2012, and 24.3% for the same period in 2011. The change in effective tax rate from June 30, 2011, is primarily due to the redemption of BOLI which resulted in an additional income tax provision of $160,000, or 10.4% of income before income taxes for the quarter ended June 30, 2012. 32
Noninterest income decreased $46,000 to $901,000 for the three months ended June 30, 2012, compared to $947,000 for the same period in 2011. Income from BOLI decreased $105,000 to $283,000 for the three month ended June 30, 2012, compared to $388,000 for the same period in 2011. Management redeemed certain BOLI policies because of a sudden downgrade in the credit ratings of the insurance carrier and the carrier s decision to close out its individual life policies to new sales. The decrease in income from BOLI was primarily the result of a $102,000 charge associated with transferring the policies to a different carrier. The remainder of our BOLI policies are diversified among eight other carriers, all of which have high credit quality. This decrease was partially offset by a $51,000 increase in net gains on the sales of securities to $97,000, compared to $46,000 the same period in 2011.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND JUNE 30, 2011 General Net income was $3.3 million, or $0.13 per diluted share, for the six months ended June 30, 2012, as compared to $2.9 million, or $0.11 per diluted share, for the same period in 2011. Net interest and dividend income was $15.1 million for the six months ended June 30, 2012, and $15.4 million for the same period in 2011. Net Interest and Dividend Income The following tables set forth the information relating to our average balance and net interest income for the six months ended June 30, 2012 and 2011, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Yields and costs are derived by dividing interest income by the average balance of interest-earning assets and interest expense by the average balance of interest-bearing liabilities for the periods shown. The interest rate spread is the difference between the total average yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. Average balances are derived from actual daily balances over the periods indicated. Interest income includes fees earned from making changes in loan rates and terms and fees earned when the real estate loans are prepaid or refinanced. For analytical purposes, the interest earned on tax-exempt assets is adjusted to a tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and tax-exempt assets. 33
Provision for Loan Losses The amount that we provided for loan losses during the six months ended June 30, 2012, was based upon the changes that occurred in the loan portfolio during that same period. The changes in the loan portfolio, described in detail below, include an increase in residential real estate loans and commercial real estate loans, partially offset by a decrease in commercial and industrial loans and net loan charge-offs. After evaluating these factors, we provided $480,000 for loan losses for the six months ended June 30, 2012, compared to $514,000 for the same period in 2011. The allowance was $8.1 million at June 30, 2012, and $7.8 million at December 31, 2011. The allowance for loan losses was 1.38% of total loans at June 30, 2012, and 1.40% at December 31, 2011. Residential real estate loans increased $30.3 million to $222.8 million compared to December 31, 2011. We consider these types of loans to contain less credit risk and market risk than both commercial and industrial and commercial real estate loans. Commercial real estate loans increased $1.8 million to $234.3 million at June 30, 2012, from $232.5 million at December 31, 2011. Commercial and industrial loans decreased $2.0 million to $123.7 million at June 30, 2012, from $125.7 million at December 31, 2011. A summary of our provision for loan losses by loan segment is listed in Note 5 of the accompanying consolidated financial statements. Net charge-offs were $179,000 for the six months ended June 30, 2012. This was comprised of charge-offs of $246,000, partially offset by recoveries of $67,000 for the same period. Net charge-offs were $375,000 for the six months ended June 30, 2011. This was comprised of charge-offs of $616,000, partially offset by recoveries of $241,000. Although we believe that we have established and maintained the allowance for loan losses at adequate levels, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current operating environment. Noninterest Income Noninterest income increased $1.7 million to $3.5 million for the six months ended June 30, 2012, from $1.8 million for the same period in 2011. This was primarily due to $1.7 million in net gains on the sales of securities, compared to $77,000 the same period in 2011. With mortgage rates declining to new lows, we experienced a high level of prepayment activity in its mortgage-backed securities, which negatively affected the yield of the portfolio. In an effort to improve portfolio performance, management sold certain mortgage-backed securities that were prepaying rapidly and were expected to continue to prepay. Rather than receive principal payments back at par value, management sold the securities at a net gain, which created greater economic value for us. Noninterest Expense Noninterest expense increased $704,000 for the six months ended June 30, 2012, to $13.7 million from $13.0 million in the comparable 2011 period. Salaries and benefits increased $691,000 to $8.4 million for the six months ended June 30, 2012. This was mainly the result of new personnel, particularly in the commercial lending and compliance divisions, along with normal increases in this category. Income Taxes For the six months ended June 30, 2012, we had a tax provision of $1.1 million as compared to $790,000 for the same period in 2011. The effective tax rate was 25.4% for the six months ended June 30, 2012, and 21.7% for the same period in 2011. The change in effective tax rate from June 31, 2011, is primarily due to the redemption of BOLI which resulted in an additional income tax provision of $160,000, or 3.6% of income before income taxes for the six months ended June 30, 2012. 36
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