2010
Massachusetts
73-1627673
(State or other jurisdiction
(I.R.S. Employer Identification No.)
of incorporation or organization)
Massachusetts | 73-1627673 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Common Stock, $.01 par value per share
The NASDAQ Stock Market, LLC
(Title of each class)
(Name of each exchange on which registered)
Common Stock, $0.01 par value per share | The NASDAQ Global Select Market |
(Title of each class) | (Name of each exchange on which registered) |
x
x
o
o
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
o
x
2010.
2010
TABLE OF CONTENTS
ITEM | PART I | PAGE |
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1 | BUSINESS | 2 |
1A | RISK FACTORS | 41 |
1B | UNRESOLVED STAFF COMMENTS | 45 |
2 | PROPERTIES | 46 |
3 | LEGAL PROCEEDINGS | 47 |
4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 47 |
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| PART II |
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5 | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 48 |
6 | SELECTED FINANCIAL DATA | 51 |
7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL | 53 |
7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 78 |
8 | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 78 |
9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 78 |
9A | CONTROLS AND PROCEDURES | 78 |
9B | OTHER INFORMATION | 79 |
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| PART III |
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10 | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 80 |
11 | EXECUTIVE COMPENSATION | 80 |
12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 80 |
13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 80 |
14 | PRINCIPAL ACCOUNTING FEES AND SERVICES | 80 |
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| PART IV |
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15 | EXHIBITS, FINANCIAL STATEMENT SCHEDULES | 81 |
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| SIGNATURES |
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36 | |||
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54 |
•
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.
● | 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. |
BUSINESS |
On January 3, 2007, Westfield Financial completed its stock offering in connection with the second step conversion of Westfield Mutual Holding Company. As part of the conversion, New Westfield Financial, Inc. succeeded Westfield Financial as the stock holding company of Westfield Bank, and Westfield Mutual Holding Company was dissolved. In the stock offering, a total of 18,400,000 shares representing Westfield Mutual Holding Company’s ownership interest in Westfield Financial were sold by New Westfield Financial in a subscription offering, community offering and syndicated offering. In addition, each outstanding share of Westfield Financial as of January 3, 2007 was exchanged for 3.28138 new shares of New Westfield Financial common stock. New Westfield Financial, Inc. changed its name to Westfield Financial, Inc. effective January 3, 2007.
Historically, Westfield Bank has been a community-oriented provider of banking products and services to businesses and individuals, including traditional products such as residential and commercial real estate loans, consumer loans and a variety of deposit products. In recent years, however, Westfield Bank has developed and implemented a lending strategy that focuses less on residential real estate lending and morebank, we focus on servicing commercial customers, including increased emphasis on commercial and industrial lending and commercial deposit relationships, extending its branch network and broadening its product lines and services. Westfield Bank believesrelationships. We believe that this business strategyfocus is best for itsour long term success and viability, and complements itsour existing commitment to high quality customer service.
Westfield Bank refers substantially all of the originations of its residential real estate loans to a third party mortgage company. Residential real estate borrowers submit applications to Westfield Bank, but the loan is approved by and closed on the books of the mortgage company. The third party mortgage company owns the servicing rights and services the loans. Westfield Bank retains no residual ownership interest in these loans. Westfield Bank receives a fee for each of the loans originated by the third party mortgage company. Westfield Bank may purchase residential real estate loans from the third party mortgage company depending on market conditions. To date, Westfield Bank has not purchased a significant amount of loans from the third party mortgage company.
2
Westfield Bank’s revenues are derived principally from interest on its loans and interest and dividends on its investment securities. Its primary sources of funds are deposits, short-term borrowings, long-term debt, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities, and funds provided by operations.
Unless In October 2009, we formed WB Real Estate Holdings, LLC, a Massachusetts-chartered limited liability company, for the context otherwise requires, all references in this document to Westfield Financial or Westfield Bank include Westfield Financial, Westfield Bank, Elm Street Securities Corporation and WFD Securities, Inc. on a consolidated basis.
primary purpose of holding real property acquired as security for debts previously contracted by the Bank.
The economy of Westfield Bank’s market area historically has been supported by a variety of industries. Its primary market area has benefited from the presence of large employers centered in insurance, health care, warehousing, manufacturing and education. Among the largest employers currently in its market area are Bay State Health Systems, Big Y Foods, Friendly Ice Cream Corporation, Mass Mutual Life Insurance Company, Mestek, Noble Hospital, the University of Massachusetts, Westfield State College, American International College, and the Sullivan Paper Company. In addition, other employment and economic activity is provided by a substantial number of small and medium size businesses in the area.
3
Westfield Bank’s future growth opportunities will be influenced by the growth and stability of the statewide and regional economies, other demographic population trends and the competitive environment. Westfield Bank believes that it has developed lending products and marketing strategies to address the diverse credit-related needs of the residents in its market area.
Median household and per capita income levels in Hampden County are below the state average, which is dominated by relatively high income levels prevailing in the populous Boston metropolitan area. Similarly, the median household and per capita income levels in Westfield Bank’s markets more closely approximate but also fall below the national averages.
As of December 2008, the unemployment rate of Hampden County and Massachusetts was 7.2% and 6.9%, respectively, compared to 4.6% and 4.5%, respectively, in December 2007.
4
| At December 31, | |||||||||||||||||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 | |||||||||||||||
| Amount |
| Percent of |
| Amount |
| Percent of |
| Amount |
| Percent of |
| Amount |
| Percent of |
| Amount |
| Percent of | |||||
| (Dollars in thousands) | |||||||||||||||||||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial | $223,857 |
| 46.61 | % |
| $189,964 |
| 45.22 | % |
| $174,556 |
| 44.74 | % |
| $169,564 |
| 44.17 | % |
| $144,336 |
| 38.65 | % |
Residential | 62,810 |
| 13.08 |
|
| 72,170 |
| 17.18 |
|
| 79,308 |
| 20.33 |
|
| 82,279 |
| 21.43 |
|
| 101,098 |
| 27.07 |
|
Home equity | 35,562 |
| 7.40 |
|
| 35,940 |
| 8.56 |
|
| 30,232 |
| 7.75 |
|
| 24,639 |
| 6.42 |
|
| 21,724 |
| 5.82 |
|
Total real estate loans | 322,229 |
| 67.09 |
|
| 298,074 |
| 70.96 |
|
| 284,096 |
| 72.82 |
|
| 276,482 |
| 72.02 |
|
| 267,158 |
| 71.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Other loans: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial | 153,861 |
| 32.03 |
|
| 116,514 |
| 27.74 |
|
| 100,237 |
| 25.69 |
|
| 100,019 |
| 26.06 |
|
| 94,726 |
| 25.36 |
|
Consumer, other | 4,248 |
| 0.88 |
|
| 5,479 |
| 1.30 |
|
| 5,841 |
| 1.49 |
|
| 7,372 |
| 1.92 |
|
| 11,565 |
| 3.10 |
|
Total other loans | 158,109 |
| 32.91 |
|
| 121,993 |
| 29.04 |
|
| 106,078 |
| 27.18 |
|
| 107,391 |
| 27.98 |
|
| 106,291 |
| 28.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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Total loans | 480,338 |
| 100.00 | % |
| 420,067 |
| 100.00 | % |
| 390,174 |
| 100.00 | % |
| 383,873 |
| 100.00 | % |
| 373,449 |
| 100.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned premiums and net deferred | 593 |
|
|
|
| 561 |
|
|
|
| 447 |
|
|
|
| 386 |
|
|
|
| 429 |
|
|
|
Allowance for loan losses | (8,796) |
|
|
|
| (5,726) |
|
|
|
| (5,437) |
|
|
|
| (5,422) |
|
|
|
| (5,277) |
|
|
|
Total loans, net | $472,135 |
|
|
|
| $414,902 |
|
|
|
| $385,184 |
|
|
|
| $378,837 |
|
|
|
| $368,601 |
|
|
|
|
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|
|
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|
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5
At December 31, | ||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||
Percent of | Percent of | Percent of | Percent of | Percent of | ||||||||||||||||||||||||||||||||||||
Amount | Total | Amount | Total | Amount | Total | Amount | Total | Amount | Total | |||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||||||||||
Commercial | $ | 221,578 | 43.57 | % | $ | 229,061 | 48.08 | % | $ | 223,857 | 46.61 | % | $ | 189,964 | 45.22 | % | $ | 174,556 | 44.74 | % | ||||||||||||||||||||
Residential | 112,680 | 22.17 | 64,299 | 13.50 | 62,810 | 13.08 | 72,170 | 17.18 | 79,308 | 20.33 | ||||||||||||||||||||||||||||||
Home equity | 36,116 | 7.09 | 34,755 | 7.29 | 35,562 | 7.40 | 35,940 | 8.56 | 30,232 | 7.75 | ||||||||||||||||||||||||||||||
Total real estate loans | 370,374 | 72.83 | 328,115 | 68.87 | 322,229 | 67.09 | 298,074 | 70.96 | 284,096 | 72.82 | ||||||||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 135,250 | 26.59 | 145,012 | 30.44 | 153,861 | 32.03 | 116,514 | 27.74 | 100,237 | 25.69 | ||||||||||||||||||||||||||||||
Consumer, other | 2,960 | 0.58 | 3,307 | 0.69 | 4,248 | 0.88 | 5,479 | 1.30 | 5,841 | 1.49 | ||||||||||||||||||||||||||||||
Total other loans | 138,210 | 27.17 | 148,319 | 31.13 | 158,109 | 32.91 | 121,993 | 29.04 | 106,078 | 27.18 | ||||||||||||||||||||||||||||||
Total loans | 508,584 | 100.00 | % | 476,434 | 100.00 | % | 480,338 | 100.00 | % | 420,067 | 100.00 | % | 390,174 | 100.00 | % | |||||||||||||||||||||||||
Unearned premiums and net deferred | ||||||||||||||||||||||||||||||||||||||||
loan fees and costs, net | 742 | 360 | 593 | 561 | 447 | |||||||||||||||||||||||||||||||||||
Allowance for loan losses | (6,934 | ) | (7,645 | ) | (8,796 | ) | (5,726 | ) | (5,437 | ) | ||||||||||||||||||||||||||||||
Total loans, net | $ | 502,392 | $ | 469,149 | $ | 472,135 | $ | 414,902 | $ | 385,184 | ||||||||||||||||||||||||||||||
| At December 31, 2008 | ||||||||||
| Residential |
| Home Equity |
| Commercial |
| Commercial |
| Consumer |
| Totals |
| (In thousands) | ||||||||||
Amount due: |
|
|
|
|
|
|
|
|
|
|
|
Within one year | $ 21,902 |
| $ 11,517 |
| $ 37,529 |
| $ 81,324 |
| $ 839 |
| $153,111 |
|
|
|
|
|
|
|
|
|
|
|
|
After one year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to three years | 8,942 |
| 825 |
| 56,151 |
| 12,790 |
| 1,565 |
| 80,273 |
Three to five years | 2,223 |
| 1,694 |
| 83,112 |
| 50,175 |
| 1,588 |
| 138,792 |
Five to ten years | 5,449 |
| 8,700 |
| 42,063 |
| 9,572 |
| 14 |
| 65,798 |
Ten to twenty years | 6,748 |
| 12,826 |
| 4,277 |
| - |
| - |
| 23,851 |
Over twenty years | 17,546 |
| - |
| 725 |
| - |
| 242 |
| 18,513 |
Total due after one year | 40,908 |
| 24,045 |
| 186,328 |
| 72,537 |
| 3,409 |
| 327,227 |
|
|
|
|
|
|
|
|
|
|
|
|
Total amount due: | 62,810 |
| 35,562 |
| 223,857 |
| 153,861 |
| 4,248 |
| 480,338 |
|
|
|
|
|
|
|
|
|
|
|
|
Unearned premiums and | 84 |
| 294 |
| 1 |
| 206 |
| 8 |
| 593 |
Allowance for loan losses | (295) |
| (167) |
| (2,216) |
| (6,062) |
| (56) |
| (8,796) |
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net | $ 62,599 |
| $ 35,689 |
| $ 221,642 |
| $ 148,005 |
| $ 4,200 |
| $472,135 |
6
At December 31, 2010 | ||||||||||||||||||||||||
Residential | Commercial | Commercial | ||||||||||||||||||||||
Real Estate | Home Equity | Real Estate | and Industrial | Consumer | ||||||||||||||||||||
Loans | Loans | Loans | Loans | Loans | Totals | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Amount due: | ||||||||||||||||||||||||
Within one year | $ | 14,806 | $ | 18,050 | $ | 21,929 | $ | 76,355 | $ | 639 | $ | 131,779 | ||||||||||||
After one year: | ||||||||||||||||||||||||
One to three years | 3,062 | 437 | 51,961 | 30,025 | 916 | 86,401 | ||||||||||||||||||
Three to five years | 722 | 1,604 | 114,873 | 19,872 | 980 | 138,051 | ||||||||||||||||||
Five to ten years | 5,812 | 7,605 | 13,617 | 4,429 | - | 31,463 | ||||||||||||||||||
Ten to twenty years | 33,752 | 8,420 | 15,354 | - | - | 57,526 | ||||||||||||||||||
Over twenty years | 54,526 | - | 3,844 | 4,569 | 425 | 63,364 | ||||||||||||||||||
Total due after one year | 97,874 | 18,066 | 199,649 | 58,895 | 2,321 | 376,805 | ||||||||||||||||||
Total amount due: | 112,680 | 36,116 | 221,578 | 135,250 | 2,960 | 508,584 | ||||||||||||||||||
Net deferred loan origination costs | 314 | 297 | (150 | ) | 275 | 6 | 742 | |||||||||||||||||
Allowance for loan losses | (664 | ) | (213 | ) | (3,182 | ) | (2,849 | ) | (26 | ) | (6,934 | ) | ||||||||||||
Loans, net | $ | 112,330 | $ | 36,200 | $ | 218,246 | $ | 132,676 | $ | 2,940 | $ | 502,392 |
Due After December 31, 2011 | ||||||||||||
Fixed | Adjustable | Total | ||||||||||
(In thousands) | ||||||||||||
Real estate loans: | ||||||||||||
Residential | $ | 94,470 | $ | 3,404 | $ | 97,874 | ||||||
Home equity | 18,066 | - | 18,066 | |||||||||
Commercial real estate | 48,500 | 151,149 | 199,649 | |||||||||
Total real estate loans | 161,036 | 154,553 | 315,589 | |||||||||
Other loans: | ||||||||||||
Commercial and industrial | 46,892 | 12,003 | 58,895 | |||||||||
Consumer | 2,321 | - | 2,321 | |||||||||
Total other loans | 49,213 | 12,003 | 61,216 | |||||||||
Total loans | $ | 210,249 | $ | 166,556 | $ | 376,805 |
| Due After December 31, 2009 | ||||
| Fixed |
| Adjustable |
| Total |
| (In thousands) | ||||
|
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|
|
|
|
Real estate loans: |
|
|
|
|
|
Residential | $ 32,846 |
| $ 8,062 |
| $ 40,908 |
Home Equity | 24,045 |
| - |
| 24,045 |
Commercial real estate | 33,523 |
| 152,805 |
| 186,328 |
Totat real estate loans | 90,414 |
| 160,867 |
| 251,281 |
|
|
|
|
|
|
Other loans: |
|
|
|
|
|
Commercial and Industrial | 58,260 |
| 14,277 |
| 72,537 |
Consumer | 3,409 |
| - |
| 3,409 |
Total other loans | 61,669 |
| 14,277 |
| 75,946 |
|
|
|
|
|
|
Total loans | $ 152,083 |
| $ 175,144 |
| $ 327,227 |
|
|
|
|
|
|
7
For the Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Loans: | ||||||||||||
Balance outstanding at beginning of year | $ | 476,434 | $ | 480,338 | $ | 420,067 | ||||||
Originations: | ||||||||||||
Real estate loans: | ||||||||||||
Residential | 1,830 | 1,378 | 2,807 | |||||||||
Home equity | 13,167 | 16,601 | 12,120 | |||||||||
Commercial | 19,174 | 39,805 | 40,367 | |||||||||
Total mortgage originations | 34,171 | 57,784 | 55,294 | |||||||||
Commercial and industrial loans | 41,029 | 47,492 | 84,300 | |||||||||
Consumer loans | 1,550 | 1,299 | 1,624 | |||||||||
Total originations | 76,750 | 106,575 | 141,218 | |||||||||
Purchase of one-to-four family mortgage loans | 61,880 | 16,381 | 1,648 | |||||||||
138,630 | 122,956 | 142,866 | ||||||||||
Less: | ||||||||||||
Principal repayments, unadvanced funds and other, net | 96,846 | 121,809 | 82,212 | |||||||||
Loan charge-offs, net | 9,634 | 5,051 | 383 | |||||||||
Total deductions | 106,480 | 126,860 | 82,595 | |||||||||
Ending balance | $ | 508,584 | $ | 476,434 | $ | 480,338 |
| For the Year Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
Loans: |
|
|
|
|
|
Balance outstanding at beginning of year | $ 420,067 |
| $ 390,174 |
| $ 383,873 |
|
|
|
|
|
|
Originations: |
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
Residential | 2,807 |
| 3,692 |
| 4,337 |
Home Equity | 12,120 |
| 17,158 |
| 15,336 |
Commericial | 40,367 |
| 44,811 |
| 52,807 |
Total mortgage originations | 55,294 |
| 65,661 |
| 72,480 |
|
|
|
|
|
|
Commercial and industrial loans | 84,300 |
| 59,812 |
| 34,864 |
Consumer loans | 1,624 |
| 3,161 |
| 3,657 |
Total originations | 141,218 |
| 128,634 |
| 111,001 |
Purchase of one-to-four family mortgage loans | 1,648 |
| 1,759 |
| 11,845 |
| 142,866 |
| 130,393 |
| 122,846 |
|
|
|
|
|
|
Less: |
|
|
|
|
|
Principal repayments, unadvanced funds and |
|
|
|
|
|
82,212 |
| 100,389 |
| 116,170 | |
Loan charge-offs, net | 383 |
| 111 |
| 375 |
Total deductions | 82,595 |
| 100,500 |
| 116,545 |
Ending balance | $ 480,338 |
| $ 420,067 |
| $ 390,174 |
8
Westfield Bank’s
9
2010.
Westfield Bank
10
Westfield Bank’s
Westfield Bank’s
11
Westfield Bank offers
we serve.
12
Westfield Bank’s
13
Included in nonperforming loans at December 31, 2010 is one loan in the amount of $125,000 which was modified in a troubled debt restructuring (“TDR”). We had no TDR’s at December 31, 2009 or 2008.
| At December 31, | |||||||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 | |||||
| (Dollars in thousands) | |||||||||||||
Nonaccrual real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential | $ 905 |
|
| $ 820 |
|
| $ 803 |
|
| $ 321 |
|
| $ 492 |
|
Home equity | 239 |
|
| 175 |
|
| 103 |
|
| 108 |
|
| 139 |
|
Commercial real estate | 1,460 |
|
| 177 |
|
| 69 |
|
| 1,285 |
|
| 1,341 |
|
Total nonaccrual real estate loans | 2,604 |
|
| 1,172 |
|
| 975 |
|
| 1,714 |
|
| 1,972 |
|
Other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial | 6,195 |
|
| 19 |
|
| 44 |
|
| 173 |
|
| 170 |
|
Consumer | 6 |
|
| 11 |
|
| 9 |
|
| 32 |
|
| 29 |
|
Total nonaccrual consumer and other loans | 6,201 |
|
| 30 |
|
| 53 |
|
| 205 |
|
| 199 |
|
Total nonperforming loans | 8,805 |
|
| 1,202 |
|
| 1,028 |
|
| 1,919 |
|
| 2,171 |
|
Foreclosed real estate, net | - |
|
| - |
|
| - |
|
| - |
|
| - |
|
Total nonperforming assets | $ 8,805 |
|
| $ 1,202 |
|
| $ 1,028 |
|
| $ 1,919 |
|
| $ 2,171 |
|
Nonperforming loans to total loans | 1.83 | % |
| 0.29 | % |
| 0.26 | % |
| 0.50 | % |
| 0.58 | % |
Nonperforming assets to total assets | 0.79 |
|
| 0.12 |
|
| 0.10 |
|
| 0.24 |
|
| 0.27 |
|
At December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Nonaccrual real estate loans: | ||||||||||||||||||||
Residential | $ | 629 | $ | 784 | $ | 905 | $ | 820 | $ | 803 | ||||||||||
Home equity | 144 | 225 | 239 | 175 | 103 | |||||||||||||||
Commercial real estate | 1,892 | 782 | 1,460 | 177 | 69 | |||||||||||||||
Total nonaccrual real estate loans | 2,665 | 1,791 | 2,604 | 1,172 | 975 | |||||||||||||||
Other loans: | ||||||||||||||||||||
Commercial and industrial | 539 | 3,675 | 6,195 | 19 | 44 | |||||||||||||||
Consumer | - | 4 | 6 | 11 | 9 | |||||||||||||||
Total nonaccrual other loans | 539 | 3,679 | 6,201 | 30 | 53 | |||||||||||||||
Total nonperforming loans | 3,204 | 5,470 | 8,805 | 1,202 | 1,028 | |||||||||||||||
Foreclosed real estate, net | 223 | 1,662 | - | - | - | |||||||||||||||
Total nonperforming assets | $ | 3,427 | $ | 7,132 | $ | 8,805 | $ | 1,202 | $ | 1,028 | ||||||||||
Nonperforming loans to total loans | 0.63 | % | 1.15 | % | 1.83 | % | 0.29 | % | 0.26 | % | ||||||||||
Nonperforming assets to total assets | 0.28 | 0.60 | 0.79 | 0.12 | 0.10 |
14
| At or for Years Ended December 31, | |||||||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 | |||||
| (Dollars in thousands) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year | $ 5,726 |
|
| $ 5,437 |
|
| $ 5,422 |
|
| $ 5,277 |
|
| $ 4,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential | (131) |
|
| - |
|
| - |
|
| - |
|
| - |
|
Commercial real estate | - |
|
| - |
|
| - |
|
| - |
|
| - |
|
Home equity loans | - |
|
| - |
|
| - |
|
| - |
|
| - |
|
Commercial and industrial | (284) |
|
| (255) |
|
| (505) |
|
| (431) |
|
| (14) |
|
Consumer | (34) |
|
| (62) |
|
| (79) |
|
| (181) |
|
| (390) |
|
Total charge-offs | (449) |
|
| (317) |
|
| (584) |
|
| (612) |
|
| (404) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential | - |
|
| - |
|
| 4 |
|
| - |
|
| - |
|
Commercial real estate | - |
|
| - |
|
| - |
|
| 1 |
|
| - |
|
Home equity loans | 4 |
|
| 3 |
|
| 3 |
|
| 3 |
|
| 4 |
|
Commercial and industrial | 4 |
|
| 54 |
|
| 7 |
|
| 9 |
|
| 65 |
|
Consumer | 58 |
|
| 149 |
|
| 195 |
|
| 279 |
|
| 220 |
|
Total recoveries | 66 |
|
| 206 |
|
| 209 |
|
| 292 |
|
| 289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs | (383) |
|
| (111) |
|
| (375) |
|
| (320) |
|
| (115) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses | 3,453 |
|
| 400 |
|
| 390 |
|
| 465 |
|
| 750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year | $ 8,796 |
|
| $ 5,726 |
|
| $ 5,437 |
|
| $ 5,422 |
|
| $ 5,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable (1) | $ 480,338 |
|
| $ 420,067 |
|
| $ 390,174 |
|
| $ 383,873 |
|
| $ 373,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans outstanding | $ 444,492 |
|
| $ 398,281 |
|
| $ 386,039 |
|
| $ 383,436 |
|
| $ 366,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a | 1.83 | % |
| 1.36 | % |
| 1.39 | % |
| 1.41 | % |
| 1.41 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged-off as a | 0.09 |
|
| 0.03 |
|
| 0.10 |
|
| 0.08 |
|
| 0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Does not include unearned premiums, deferred costs and fees, or allowance for loan losses.
Westfield Bank maintains
At or for Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance at beginning of year | $ | 7,645 | $ | 8,796 | $ | 5,726 | $ | 5,437 | $ | 5,422 | ||||||||||
Charge-offs: | ||||||||||||||||||||
Residential | (36 | ) | - | (131 | ) | - | - | |||||||||||||
Commercial real estate | (7,536 | ) | (50 | ) | - | - | - | |||||||||||||
Home equity loans | - | (117 | ) | - | - | - | ||||||||||||||
Commercial and industrial | (2,129 | ) | (4,910 | ) | (284 | ) | (255 | ) | (505 | ) | ||||||||||
Consumer | (16 | ) | (22 | ) | (34 | ) | (62 | ) | (79 | ) | ||||||||||
Total charge-offs | (9,717 | ) | (5,099 | ) | (449 | ) | (317 | ) | (584 | ) | ||||||||||
Recoveries: | ||||||||||||||||||||
Residential | 7 | - | - | - | 4 | |||||||||||||||
Commercial real estate | 8 | - | - | - | - | |||||||||||||||
Home equity loans | 4 | 6 | 4 | 3 | 3 | |||||||||||||||
Commercial and industrial | 21 | 2 | 4 | 54 | 7 | |||||||||||||||
Consumer | 43 | 40 | 58 | 149 | 195 | |||||||||||||||
Total recoveries | 83 | 48 | 66 | 206 | 209 | |||||||||||||||
Net charge-offs | (9,634 | ) | (5,051 | ) | (383 | ) | (111 | ) | (375 | ) | ||||||||||
Provision for loan losses | 8,923 | 3,900 | 3,453 | 400 | 390 | |||||||||||||||
Balance at end of year | $ | 6,934 | $ | 7,645 | $ | 8,796 | $ | 5,726 | $ | 5,437 | ||||||||||
Total loans receivable (1) | $ | 508,584 | $ | 476,434 | $ | 480,338 | $ | 420,067 | $ | 390,174 | ||||||||||
Average loans outstanding | $ | 482,215 | $ | 476,214 | $ | 444,492 | $ | 398,281 | $ | 386,039 | ||||||||||
Allowance for loan losses as a | ||||||||||||||||||||
percent of total loans receivable | 1.36 | % | 1.60 | % | 1.83 | % | 1.36 | % | 1.39 | % | ||||||||||
Net loans charged-off as a percent | ||||||||||||||||||||
of average loans outstanding | 2.00 | 1.06 | 0.09 | 0.03 | 0.10 | |||||||||||||||
_________________________ | ||||||||||||||||||||
(1) Does not include unearned premiums, deferred costs and fees, or allowance for loan losses. |
15
The specific valuation allowance incorporates the results of measuring impairment for specifically identified non-homogenous problem loans in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting By Creditors for Impairment of a Loan,” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures.” In accordance with SFAS No. 114 and No. 118, theloans. The specific allowance reduces the carrying amount of the impaired loans to their estimated fair value.value if collateral dependent. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. A loan is not deemed to be impaired if there is a short delay in receipt of payment or if, during a longer period of delay, Westfield Bank expects to collect all amounts due including interest accrued at the contractual rate during the period of delay. Measurement of impairment can be based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent. Measurement of impairment does not apply to large groups of smaller balance homogenous loans that are collectively evaluated for impairment such as Westfield Bank’s portfolios of consumer and residential real estate loans.
The general allowance is calculated by applying loss factors to outstanding loans by type, excluding loans for which a specific allowance has been determined. As part of this analysis, each quarter Westfield Bank prepareswe prepare an allowance for loan losses worksheet which categorizes the loan portfolio by risk characteristics such as loan type and loan grade. The general allowance is inherently subjective as it requires material estimates that may be susceptible to significant
For information on our methodology for assessing the appropriateness of the allowance for loan losses please see Footnote 1 – “Summary of Significant Accounting Policies” of our notes to consolidated financial statements.
Westfield Bank’s
16
Westfield Bank’s
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
Specific | General | Total | Specific | General | Total | Specific | General | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||||||
Residential and home equity | $ | - | $ | 877 | $ | 877 | $ | - | $ | 487 | $ | 487 | $ | - | $ | 462 | $ | 462 | ||||||||||||||||||
Commercial | - | 3,182 | 3,182 | - | 2,371 | 2,371 | - | 2,216 | 2,216 | |||||||||||||||||||||||||||
Commercial and industrial | 19 | 2,830 | 2,849 | 875 | 3,873 | 4,748 | 2,286 | 3,776 | 6,062 | |||||||||||||||||||||||||||
Consumer | - | 26 | 26 | - | 39 | 39 | - | 56 | 56 | |||||||||||||||||||||||||||
Total | $ | 19 | $ | 6,915 | $ | 6,934 | $ | 875 | $ | 6,770 | $ | 7,645 | $ | 2,286 | $ | 6,510 | $ | 8,796 | ||||||||||||||||||
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||||||||||||
Specific | General | Total | Specific | General | Total | |||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||||||
Residential and home equity | $ | - | $ | 456 | $ | 456 | $ | - | $ | 422 | $ | 422 | ||||||||||||||||||||||||
Commercial | - | 1,756 | 1,756 | 13 | 2,004 | 2,017 | ||||||||||||||||||||||||||||||
Commercial and industrial | - | 3,436 | 3,436 | 7 | 2,912 | 2,919 | ||||||||||||||||||||||||||||||
Consumer | - | 78 | 78 | - | 79 | 79 | ||||||||||||||||||||||||||||||
Total | $ | - | $ | 5,726 | $ | 5,726 | $ | 20 | $ | 5,417 | $ | 5,437 |
| December 31, 2008 |
| December 31, 2007 |
| December 31, 2006 | ||||||||||||
| Specific |
| General |
| Total |
| Specific |
| General |
| Total |
| Specific |
| General |
| Total |
| (In thousands) | ||||||||||||||||
Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential and | $ - |
| $ 462 |
| $ 462 |
| $ - |
| $ 456 |
| $ 456 |
| $ - |
| $ 422 |
| $ 422 |
Commercial | - |
| 2,216 |
| 2,216 |
| - |
| 1,756 |
| 1,756 |
| 13 |
| 2,004 |
| 2,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and | 2,286 |
| 3,776 |
| 6,062 |
| - |
| 3,436 |
| 3,436 |
| 7 |
| 2,912 |
| 2,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer | - |
| 56 |
| 56 |
| - |
| 78 |
| 78 |
| - |
| 79 |
| 79 |
Total | $ 2,286 |
| $ 6,510 |
| $ 8,796 |
| $ - |
| $ 5,726 |
| $ 5,726 |
| $ 20 |
| $ 5,417 |
| $ 5,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2005 |
| December 31, 2004 |
|
| ||||||||||||
| Specific |
| General |
| Total |
| Specific |
| General |
| Total |
|
|
|
|
|
|
| (In thousands) |
|
|
|
|
|
| ||||||||||
Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential and | $ - |
| $ 355 |
| $ 355 |
| $ - |
| $ 421 |
| $ 421 |
|
|
|
|
|
|
Commercial | 218 |
| 2,400 |
| 2,618 |
| 264 |
| 2,097 |
| 2,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
| 2,334 |
| 2,366 |
| 236 |
| 2,078 |
| 2,314 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer | - |
| 83 |
| 83 |
| - |
| 181 |
| 181 |
|
|
|
|
|
|
Total | $ 250 |
| $ 5,172 |
| $ 5,422 |
| $ 500 |
| $ 4,777 |
| $ 5,277 |
|
|
|
|
|
|
17
loans.
| At December 31, | |||||||||||||||||||
| 2008 |
| 2007 |
| 2006 | |||||||||||||||
Loan Category | Amount of |
| Loan |
| Percent of |
| Amount of |
| Loan |
| Percent of |
| Amount of |
| Loan |
| Percent of | |||
| (Dollars in thousands) | |||||||||||||||||||
Real estate mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial | $ 2,216 |
| $ 223,857 |
| 46.61 | % |
| $ 1,756 |
| $ 189,964 |
| 45.22 | % |
| $ 2,017 |
| $ 174,556 |
| 44.74 | % |
Residential and home equity | 462 |
| 98,372 |
| 20.48 |
|
| 456 |
| 108,110 |
| 25.74 |
|
| 422 |
| 109,540 |
| 28.08 |
|
Commercial loans | 6,062 |
| 153,861 |
| 32.03 |
|
| 3,436 |
| 116,514 |
| 27.74 |
|
| 2,919 |
| 100,237 |
| 25.69 |
|
Consumer loans | 56 |
| 4,248 |
| 0.88 |
|
| 78 |
| 5,479 |
| 1.30 |
|
| 79 |
| 5,841 |
| 1.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses | $ 8,796 |
| $ 480,338 |
| 100.00 | % |
| $ 5,726 |
| $ 420,067 |
| 100.00 | % |
| $ 5,437 |
| $ 390,174 |
| 100.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, |
|
|
|
|
|
|
| ||||||||||||
| 2005 |
| 2004 |
|
|
|
|
|
|
| ||||||||||
| Amount of |
| Loan |
| Percent of |
| Amount of |
| Loan |
| Percent of |
|
|
|
|
|
|
| ||
| (Dollars in thousands) |
|
|
|
|
|
|
| ||||||||||||
Real estate mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial | $ 2,618 |
| $ 169,564 |
| 44.17 | % |
| $ 2,361 |
| $ 144,336 |
| 38.65 | % |
|
|
|
|
|
|
|
Residential and home equity | 355 |
| 106,918 |
| 27.85 |
|
| 421 |
| 122,822 |
| 32.89 |
|
|
|
|
|
|
|
|
Commercial loans | 2,366 |
| 100,019 |
| 26.06 |
|
| 2,314 |
| 94,726 |
| 25.36 |
|
|
|
|
|
|
|
|
Consumer loans | 83 |
| 7,372 |
| 1.92 |
|
| 181 |
| 11,565 |
| 3.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses | $ 5,422 |
| $ 383,873 |
| 100.00 | % |
| $ 5,277 |
| $ 373,449 |
| 100.00 | % |
|
|
|
|
|
|
|
18
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
Loan Category | Amount of Loan Loss | Loan Balances by Category | Percent of Loans in Each Category to Total Loans | Amount of Loan Loss | Loan Balances by Category | Percent of Loans in Each Category to Total Loans | Amount of Loan Loss | Loan Balances by Category | Percent of Loans in Each Category to Total Loans | |||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||||||
Commercial | $ | 3,182 | $ | 221,578 | 43.57 | % | $ | 2,371 | $ | 229,061 | 48.08 | % | $ | 2,216 | $ | 223,857 | 46.61 | % | ||||||||||||||||||
Residential and home equity | 877 | 148,796 | 29.26 | 487 | 99,054 | 20.79 | 462 | 98,372 | 20.48 | |||||||||||||||||||||||||||
Commercial loans | 2,849 | 135,250 | 26.59 | 4,748 | 145,012 | 30.44 | 6,062 | 153,861 | 32.03 | |||||||||||||||||||||||||||
Consumer loans | 26 | 2,960 | 0.58 | 39 | 3,307 | 0.69 | 56 | 4,248 | 0.88 | |||||||||||||||||||||||||||
Total allowances for loan losses | $ | 6,934 | $ | 508,584 | 100.00 | % | $ | 7,645 | $ | 476,434 | 100.00 | % | $ | 8,796 | $ | 480,338 | 100.00 | % | ||||||||||||||||||
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||||||||||||
Amount of Loan Loss | Loan Balances by Category | Percent of Loans in Each Category to Total Loans | Amount of Loan Loss | Loan Balances by Category | Percent of Loans in Each Category to Total Loans | |||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||||||
Commercial | $ | 1,756 | $ | 189,964 | 45.22 | % | $ | 2,017 | $ | 174,556 | 44.74 | % | ||||||||||||||||||||||||
Residential and home equity | 456 | 108,110 | 25.74 | 422 | 109,540 | 28.08 | ||||||||||||||||||||||||||||||
Commercial loans | 3,436 | 116,514 | 27.74 | 2,919 | 100,237 | 25.69 | ||||||||||||||||||||||||||||||
Consumer loans | 78 | 5,479 | 1.30 | 79 | 5,841 | 1.49 | ||||||||||||||||||||||||||||||
Total allowances for loan losses | $ | 5,726 | $ | 420,067 | 100.00 | % | $ | 5,437 | $ | 390,174 | 100.00 | % |
2011.
Westfield Bank’s
$644.1 million.
Westfield Financial invests
OTS.
19
Westfield Financial’s
private-label residential mortgage-backed securities.
| At December 31, | ||||||||||
| 2008 |
| 2007 |
| 2006 | ||||||
| Amortized |
| Fair |
| Amortized |
| Fair |
| Amortized |
| Fair |
| (In thousands) | ||||||||||
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises | $ 60,924 |
| $ 64,105 |
| $ 101,906 |
| $ 103,638 |
| $ 81,916 |
| $ 81,242 |
Municipal bonds | 36,354 |
| 36,655 |
| 32,993 |
| 33,402 |
| 30,204 |
| 30,387 |
Total securities | 97,278 |
| 100,760 |
| 134,899 |
| 137,040 |
| 112,120 |
| 111,629 |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae | 195,307 |
| 196,080 |
| 176,416 |
| 176,928 |
| 150,547 |
| 148,310 |
Freddie Mac | 120,596 |
| 122,078 |
| 141,662 |
| 142,535 |
| 90,972 |
| 90,477 |
Ginnie Mae | 48,293 |
| 47,977 |
| 15,882 |
| 15,883 |
| 22,060 |
| 21,695 |
Collateralized mortgage obligations | 48,916 |
| 36,328 |
| 45,844 |
| 45,382 |
| 27,336 |
| 27,169 |
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities | 413,112 |
| 402,463 |
| 379,804 |
| 380,728 |
| 290,915 |
| 287,651 |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities | 6,301 |
| 6,127 |
| 7,364 |
| 6,840 |
| 7,260 |
| 6,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Total securities | $ 516,691 |
| $ 509,350 |
| $ 522,067 |
| $ 524,608 |
| $ 410,295 |
| $ 406,276 |
20
At December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Government-sponsored enterprises | $ | 18,447 | $ | 17,864 | $ | 45,884 | $ | 47,358 | $ | 60,924 | $ | 64,105 | ||||||||||||
Municipal bonds | 42,119 | 43,077 | 36,316 | 37,774 | 36,354 | 36,655 | ||||||||||||||||||
Total debt securities | 60,566 | 60,941 | 82,200 | 85,132 | 97,278 | 100,760 | ||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Government sponsored residential mortgage-backed | 381,436 | 380,984 | 494,324 | 500,659 | 315,903 | 318,158 | ||||||||||||||||||
U.S. government guaranteed residential mortgage-backed | 192,609 | 187,676 | 17,364 | 17,333 | 48,293 | 47,977 | ||||||||||||||||||
Private label residential mortgage-backed | 8,251 | 7,578 | 15,317 | 13,068 | 48,916 | 36,328 | ||||||||||||||||||
Total mortgage-backed securities | 582,296 | 576,238 | 527,005 | 531,060 | 413,112 | 402,463 | ||||||||||||||||||
Marketable equity securities | ||||||||||||||||||||||||
Mutual funds | 6,949 | 6,913 | 6,561 | 6,489 | 6,231 | 6,088 | ||||||||||||||||||
Common and preferred stock | 70 | 47 | 70 | 59 | 70 | 39 | ||||||||||||||||||
Total marketable equity securities | 7,019 | 6,960 | 6,631 | 6,548 | 6,301 | 6,127 | ||||||||||||||||||
Total securities | $ | 649,881 | $ | 644,139 | $ | 615,836 | $ | 622,740 | $ | 516,691 | $ | 509,350 | ||||||||||||
| At December 31, | |||||||||||||||||||
| 2008 |
| 2007 |
| 2006 | |||||||||||||||
| Amortized |
| Percent of |
| Fair |
| Amortized |
| Percent of |
| Fair |
| Amortized |
| Percent of |
| Fair | |||
| (Dollars in thousands) | |||||||||||||||||||
Mortgage-backed securities available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae | $ 105,397 |
| 25.51 | % |
| $ 105,304 |
| $ 74,062 |
| 19.50 | % |
| $ 74,658 |
| $ 47,203 |
| 16.23 | % |
| $ 46,730 |
Freddie Mac | 56,529 |
| 13.68 |
|
| 56,972 |
| 86,411 |
| 22.75 |
|
| 87,202 |
| 49,554 |
| 17.03 |
|
| 49,378 |
Ginnie Mae | 40,401 |
| 9.78 |
|
| 40,424 |
| 5,674 |
| 1.49 |
|
| 5,687 |
| 8,635 |
| 2.97 |
|
| 8,543 |
Collateralized mortgage obligations | 42,453 |
| 10.28 |
|
| 31,047 |
| 39,063 |
| 10.28 |
|
| 38,631 |
| 22,430 |
| 7.71 |
|
| 22,291 |
Total mortgage-backed securities | 244,780 |
| 59.25 |
|
| 233,747 |
| 205,210 |
| 54.02 |
|
| 206,178 |
| 127,822 |
| 43.94 |
|
| 126,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities held to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae | 89,910 |
| 21.77 |
|
| 90,776 |
| 102,354 |
| 26.95 |
|
| 102,270 |
| 103,344 |
| 35.52 |
|
| 101,580 |
Freddie Mac | 64,067 |
| 15.51 |
|
| 65,106 |
| 55,251 |
| 14.55 |
|
| 55,333 |
| 41,418 |
| 14.24 |
|
| 41,099 |
Ginnie Mae | 7,892 |
| 1.91 |
|
| 7,553 |
| 10,208 |
| 2.69 |
|
| 10,196 |
| 13,425 |
| 4.61 |
|
| 13,152 |
Collateralized mortgage obligations | 6,463 |
| 1.56 |
|
| 5,281 |
| 6,781 |
| 1.79 |
|
| 6,751 |
| 4,906 |
| 1.69 |
|
| 4,878 |
Total mortgage-backed securities | 168,332 |
| 40.75 |
|
| 168,716 |
| 174,594 |
| 45.98 |
|
| 174,550 |
| 163,093 |
| 56.06 |
|
| 160,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities | $ 413,112 |
| 100.00 | % |
| $ 402,463 |
| $ 379,804 |
| 100.00 | % |
| $ 380,728 |
| $ 290,915 |
| 100.00 | % |
| $ 287,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
indicated.
At December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Amortized Cost | Percent of Total | Fair Value | Amortized Cost | Percent of Total | Fair Value | Amortized Cost | Percent of Total | Fair Value | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Available for sale: | ||||||||||||||||||||||||||||||||||||
Government sponsored residential | $ | 381,436 | 65.50 | % | $ | 380,984 | $ | 289,840 | 55.00 | % | $ | 290,248 | $ | 161,926 | 39.20 | % | $ | 162,276 | ||||||||||||||||||
U.S. government guaranteed residential | 192,609 | 33.08 | 187,676 | 1,030 | 0.19 | 1,047 | 40,401 | 9.78 | 40,424 | |||||||||||||||||||||||||||
Private label residential | 8,251 | 1.42 | 7,578 | 10,368 | 1.97 | 8,510 | 42,453 | 10.28 | 31,047 | |||||||||||||||||||||||||||
Total available for sale | 582,296 | 100.00 | 576,238 | 301,238 | 57.16 | 299,805 | 244,780 | 59.26 | 233,747 | |||||||||||||||||||||||||||
Held to maturity: | ||||||||||||||||||||||||||||||||||||
Government sponsored residential | - | - | - | 204,484 | 38.80 | 210,411 | 153,977 | 37.27 | 155,882 | |||||||||||||||||||||||||||
U.S. government guaranteed residential | - | - | - | 16,334 | 3.10 | 16,286 | 7,892 | 1.91 | 7,553 | |||||||||||||||||||||||||||
Private label residential | - | - | - | 4,949 | 0.94 | 4,558 | 6,463 | 1.56 | 5,281 | |||||||||||||||||||||||||||
Total held to maturity | - | - | - | 225,767 | 42.84 | 231,255 | 168,332 | 40.74 | 168,716 | |||||||||||||||||||||||||||
Total mortgage-backed securities | $ | 582,296 | 100.00 | % | $ | 576,238 | $ | 527,005 | 100.00 | % | $ | 531,060 | $ | 413,112 | 100.00 | % | $ | 402,463 | ||||||||||||||||||
| One Year or Less |
| More than One Year |
| More than Five Years |
| More than Ten Years |
| Total Securities | |||||||||||||||||
| Amortized |
| Weighted |
| Amortized |
| Weighted |
| Amortized |
| Weighted |
| Amortized |
| Weighted |
| Amortized |
| Fair |
| Weighted | |||||
| (Dollars in thousands) | |||||||||||||||||||||||||
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises | $ - |
| - | % |
| $ 5,018 |
| 5.41 | % |
| $ - |
| - | % |
| $ 11,000 |
| 5.00 | % |
| $ 16,018 |
| $ 16,299 |
| 4.52 | % |
Municipal bonds | - |
| - |
|
| - |
| - |
|
| 850 |
| 4.04 |
|
| 1,107 |
| 4.04 |
|
| 1,957 |
| 1,970 |
| 3.89 |
|
Total securities | - |
| - |
|
| 5,018 |
| 5.41 |
|
| 850 |
| 4.04 |
|
| 12,107 |
| 4.91 |
|
| 17,975 |
| 18,269 |
| 4.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae | - |
| - |
|
| - |
| - |
|
| - |
| - |
|
| 40,401 |
| 5.46 |
|
| 40,401 |
| 40,424 |
| 5.46 |
|
Fannie Mae | - |
| - |
|
| - |
| - |
|
| 3,411 |
| 4.65 |
|
| 101,986 |
| 5.31 |
|
| 105,397 |
| 105,304 |
| 5.28 |
|
Freddie Mac | - |
| - |
|
| - |
| - |
|
| - |
| - |
|
| 56,529 |
| 5.28 |
|
| 56,529 |
| 56,972 |
| 5.21 |
|
Collateralized mortgage obligations | - |
| - |
|
| - |
| - |
|
| 2,091 |
| 5.39 |
|
| 40,362 |
| 5.18 |
|
| 42,453 |
| 31,047 |
| 9.56 |
|
Total mortgage-backed securities | - |
| - |
|
| - |
| - |
|
| 5,502 |
| 4.93 |
|
| 239,278 |
| 5.31 |
|
| 244,780 |
| 233,747 |
| 5.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | $ - |
| - | % |
| $ 5,018 |
| 5.41 | % |
| $ 6,352 |
| 4.81 | % |
| $ 251,385 |
| 5.29 | % |
| $ 262,755 |
| $ 252,016 |
| 5.76 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises | $ - |
| - | % |
| $ 15,092 |
| 5.56 | % |
| $ 29,814 |
| 5.08 | % |
| $ - |
| - | % |
| $ 44,906 |
| $ 47,806 |
| 3.95 |
|
Municipal bonds | - |
| - |
|
| 5,838 |
| 3.61 |
|
| 14,300 |
| 4.07 |
|
| 14,259 |
| 4.33 |
|
| 34,397 |
| 34,685 |
| 3.87 |
|
Total investment securities | - |
| - |
|
| 20,930 |
| 5.02 |
|
| 44,114 |
| 4.75 |
|
| 14,259 |
| 4.33 |
|
| 79,303 |
| 82,491 |
| 3.92 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae | 1 |
| (1.42) |
|
| 203 |
| 4.17 |
|
| - |
| - |
|
| 7,688 |
| 4.02 |
|
| 7,892 |
| 7,553 |
| 4.44 |
|
Fannie Mae | 825 |
| (2.60) |
|
| 5,550 |
| 3.02 |
|
| 5,185 |
| 4.44 |
|
| 78,350 |
| 5.08 |
|
| 89,910 |
| 90,776 |
| 4.82 |
|
Freddie Mac | 138 |
| (41.98) |
|
| 2,270 |
| 1.26 |
|
| - |
| - |
|
| 61,659 |
| 5.33 |
|
| 64,067 |
| 65,106 |
| 4.79 |
|
Collateralized mortgage obligations | - |
| - |
|
| - |
| - |
|
| - |
| - |
|
| 6,463 |
| 5.45 |
|
| 6,463 |
| 5,281 |
| 7.70 |
|
Total mortgage-backed securities | 964 |
| (8.24) |
|
| 8,023 |
| 2.55 |
|
| 5,185 |
| 4.44 |
|
| 154,160 |
| 5.14 |
|
| 168,332 |
| 168,716 |
| 4.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | $ 964 |
| (8.24) | % |
| $ 28,953 |
| 4.33 | % |
| $ 49,299 |
| 4.72 | % |
| $ 168,419 |
| 5.07 | % |
| $ 247,635 |
| $ 251,207 |
| 4.56 | % |
22
One Year or Less | More than One Year through Five Years | More than Five Years through Ten Years | More than Ten Years | Total Securities | |||||||||||||||||||||||||||||||||||
Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Fair Value | Weighted Average Yield | |||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
Debt securities: | |||||||||||||||||||||||||||||||||||||||
Government-sponsored enterprises | $ | - | - | % | $ | 8,497 | 2.02 | % | $ | - | - | % | $ | 9,950 | 3.24 | % | $ | 18,447 | $ | 17,864 | 2.68 | % | |||||||||||||||||
Municipal bonds | 896 | 3.43 | 9,814 | 3.69 | 21,361 | 3.94 | 10,048 | 4.39 | 42,119 | 43,077 | 3.98 | ||||||||||||||||||||||||||||
Total debt securities | 896 | 3.43 | 18,311 | 2.92 | 21,361 | 3.94 | 19,998 | 3.82 | 60,566 | 60,941 | 3.59 | ||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||
Government sponsored residential mortgage- backed | 3 | 5.00 | 981 | 4.11 | 17,476 | 3.28 | 362,976 | 3.10 | 381,436 | 380,984 | 3.11 | ||||||||||||||||||||||||||||
U.S. government guaranteed residential mortgage-backed | - | - | 74 | 1.95 | - | - | 192,535 | 2.92 | 192,609 | 187,676 | 2.92 | ||||||||||||||||||||||||||||
Private label residential mortgage-backed | - | - | - | - | - | - | 8,251 | 5.73 | 8,251 | 7,578 | 5.73 | ||||||||||||||||||||||||||||
Total mortgage- backed securities | 3 | 5.00 | 1,055 | 3.96 | 17,476 | 3.28 | 563,762 | 3.07 | 582,296 | 576,238 | 3.08 | ||||||||||||||||||||||||||||
Total | $ | 899 | 3.44 | % | $ | 19,366 | 2.97 | % | $ | 38,837 | 3.64 | % | $ | 583,760 | 3.10 | % | $ | 642,862 | $ | 637,179 | 3.13 | % | |||||||||||||||||
23
2008.
| At December 31, | ||||||||||||||||||||||
| 2008 |
| 2007 |
| 2006 | ||||||||||||||||||
| Amount |
| Percent |
| Weighted |
| Amount |
| Percent |
| Weighted |
| Amount |
| Percent |
| Weighted | ||||||
| (Dollars in thousands) | ||||||||||||||||||||||
Demand deposits | $ 50,860 |
| 8.65 | % |
| - | % |
| $ 42,408 |
| 7.04 | % |
| - | % |
| $ 42,383 |
| 6.75 | % |
| - | % |
NOW accounts | 83,788 |
| 14.25 |
|
| 1.17 |
|
| 85,316 |
| 14.15 |
|
| 1.62 |
|
| 80,527 |
| 12.83 |
|
| 1.40 |
|
Regular Accounts | 68,085 |
| 11.58 |
|
| 1.05 |
|
| 47,072 |
| 7.81 |
|
| 1.24 |
|
| 36,110 |
| 5.76 |
|
| 0.50 |
|
Money Market Accounts | 57,655 |
| 9.80 |
|
| 0.94 |
|
| 74,601 |
| 12.38 |
|
| 1.24 |
|
| 94,441 |
| 15.05 |
|
| 1.51 |
|
Total non-certificated accounts | 260,388 |
| 44.28 |
|
| 0.86 |
|
| 249,397 |
| 41.38 |
|
| 1.16 |
|
| 253,461 |
| 40.39 |
|
| 1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Time certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within 1 year | 245,939 |
| 41.83 |
|
| 3.30 |
|
| 266,234 |
| 44.18 |
|
| 4.49 |
|
| 270,026 |
| 43.04 |
|
| 4.40 |
|
Over 1 year through 3 years | 78,627 |
| 13.37 |
|
| 3.82 |
|
| 79,806 |
| 13.24 |
|
| 4.26 |
|
| 91,201 |
| 14.53 |
|
| 4.33 |
|
Over 3 years | 3,075 |
| 0.52 |
|
| 3.43 |
|
| 7,239 |
| 1.20 |
|
| 4.50 |
|
| 12,778 |
| 2.04 |
|
| 4.56 |
|
Total certificated accounts | 327,641 |
| 55.72 |
|
| 3.43 |
|
| 353,279 |
| 58.62 |
|
| 4.44 |
|
| 374,005 |
| 59.61 |
|
| 4.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total | $ 588,029 |
| 100.00 | % |
| 2.29 | % |
| $ 602,676 |
| 100.00 | % |
| 3.08 | % |
| $ 627,466 |
| 100.00 | % |
| 3.05 | % |
24
At December, 31 2010 2009 2008 Amount Percent Weighted
Average
Rates Amount Percent Weighted
Average
Rates Amount Percent Weighted
Average
Rates (Dollars in thousands) Demand deposits $ 85,217 12.17 % - % $ 80,110 12.36 % - % $ 50,860 8.65 % - % Now accounts 83,621 11.94 1.08 70,462 10.87 1.42 83,788 14.25 1.17 Regular accounts 101,333 14.47 0.62 104,650 16.15 0.88 68,085 11.58 1.05 Money market accounts 76,184 10.88 0.57 50,120 7.74 0.74 57,655 9.80 0.94 Total non-certificate accounts 346,355 49.46 0.57 305,342 47.12 0.75 260,388 44.28 0.86 Time certificates of deposit: Due within the year 236,926 33.83 1.79 242,318 37.40 2.41 245,939 41.83 3.30 Over 1 year through 3 years 72,582 10.36 2.22 85,867 13.25 2.65 78,627 13.37 3.82 Over 3 years 44,472 6.35 2.62 14,448 2.23 2.02 3,075 0.52 3.43 Total certificate accounts 353,980 50.54 1.98 342,633 52.88 2.45 327,641 55.72 3.43 Total $ 700,335 100.00 % 1.28 % $ 647,975 100.00 % 1.65 % $ 588,029 100.00 % 2.29 %
Maturity Period | Amount | Weighted Average Rate | ||||||
(In thousands) | ||||||||
3 months or less | $ | 24,971 | 2.21 | % | ||||
Over 3 months through 6 months | 18,187 | 1.80 | ||||||
Over 6 months through 12 months | 31,929 | 1.55 | ||||||
Over 12 months | 40,458 | 2.40 | ||||||
Total | $ | 115,545 | 2.03 | % |
Maturity Period |
| Amount |
| Weighted | |
|
| (Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
Three months or less |
| $ 11,134 |
| 3.36 | % |
Over three months through six months |
| 24,274 |
| 3.22 |
|
Over six months through 12 months |
| 30,388 |
| 3.50 |
|
Over 12 months |
| 20,904 |
| 3.91 |
|
Total |
| $ 86,700 |
| 3.50 | % |
| At December 31, 2008 | |||||||||||
| Period to Maturity |
|
|
|
|
| ||||||
| Less than |
| One to Two |
| Two to |
| More than |
| Total |
| Percent | |
| (Dollars in thousands) |
|
|
| ||||||||
2.00% and under | $ 11,805 |
| $ 6 |
| $ 10 |
| $ 4 |
| $ 11,825 |
| 3.61 | % |
2.01% to 3.00% | 55,063 |
| 4,484 |
| 3,769 |
| 189 |
| 63,505 |
| 19.38 |
|
3.01% to 4.00% | 134,020 |
| 27,022 |
| 16,344 |
| 2,207 |
| 179,593 |
| 54.82 |
|
4.01% to 5.00% | 38,269 |
| 17,042 |
| 7,260 |
| 675 |
| 63,246 |
| 19.30 |
|
5.01% and over | 6,782 |
| 2,690 |
| - |
| - |
| 9,472 |
| 2.89 |
|
Total | $ 245,939 |
| $ 51,244 |
| $ 27,383 |
| $ 3,075 |
| $ 327,641 |
| 100.00 | % |
At December 31, 2010 | ||||||||||||||||||||||||
Period to Maturity | ||||||||||||||||||||||||
Less than One Year | One to Two Years | Two to Three Years | More than Three Years | Total | Percent of Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
2.00% and under | $ | 187,799 | $ | 16,659 | $ | 16,011 | $ | 8,853 | $ | 229,322 | 64.78 | % | ||||||||||||
2.01% to 3.00% | 23,161 | 12,373 | 24,771 | 35,481 | 95,786 | 27.06 | ||||||||||||||||||
3.01% to 4.00% | 18,895 | 2,001 | 45 | 138 | 21,079 | 5.96 | ||||||||||||||||||
4.01% to 5.00% | 7,071 | 323 | 399 | - | 7,793 | 2.20 | ||||||||||||||||||
Total | $ | 236,926 | $ | 31,356 | $ | 41,226 | $ | 44,472 | $ | 353,980 | 100.00 | % |
25
26
TAXATION
Federal
Distributions. To the extent that Westfield Bank makes “non-dividend distributions” to stockholders, such distributions will be considered to result in distributions from Westfield Bank’s unrecaptured tax bad debt reserve “base year reserve” (i.e. its reserve as of December 31, 1987), to the extent thereof and then from its supplemental reserve for losses on loans, and an amount based on the amount distributed, but no more than the amount of these reserves, will be included in Westfield Bank’s taxable income. Non-dividend distributions include distributions in excess of Westfield Bank’s current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation. However, dividends paid out of Westfield Bank’s current or accumulated earnings and profits, as calculated for federal income tax purposes, will not constitute non- dividend distributions and, therefore, will not be included in Westfield Bank’s income.
The amount of additional income created from a non-dividend distribution is equal to the lesser of Westfield Bank’s base year reserve and supplemental reserve for losses on loans or an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, in some situations, approximately one and one-half times the non-dividend distribution would be includible in gross income for federal income tax purposes, assuming a 34% federal corporate income tax rate. Westfield Bank does not intend to pay dividends that would result in the recapture of any portion of the bad debt reserves.
Corporate Alternative Minimum Tax. The alternative minimum tax rules have been devised to ensure that at least a minimum amount of income tax is paid by high-income corporate taxpayers who take advantage of substantial tax savings due to the use of certain tax deductions and exemptions. In essence, the alternative minimum tax functions as a recapture mechanism, reclaiming some of the tax deductions and credits utilized by these taxpayers when calculating their regular federal income tax liability. In general, a corporation’s alternative minimum taxable income is equal to its regular taxable income, increased by its preference items for the year and adjusted by computing certain items under special rules that negate the acceleration of certain tax benefits which are available under the regular tax rules. The alternative minimum tax rate is 20%. Such preference items include adjustments for tax exempt interest, inside build-up of life insurance policies and accelerated depreciation deductions. During the past five years, we have not been subject to alternative minimum tax and therefore have no alternative minimum tax net operating losses or credit to utilize.
27
Elimination of Dividends; Dividends Received Deduction. Westfield Financial may exclude from its income 100% of dividends received from Westfield Bank as a member of the same affiliated group of corporations.
Net Operating Losses. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding twenty taxable years. At December 31, 2008, Westfield Financial had no net operating loss carry forwards for federal income tax purposes.
State
Until 2009, financial institutions in Massachusetts were not allowed to file consolidated income tax returns. Instead, each entity in the consolidated group files a separate annual income tax return. Beginning in 2009, Westfield Financial and Westfield Bank will be required to file a combined return pursuant to a Massachusetts law change enacted in July 2008. The security corporation subsidiaries will continue to file separately. The Massachusetts excise tax rate for savings banks is currently 10.5% of federal taxable income, adjusted for certain items. Taxable income includes gross income as defined under the Internal Revenue Code, plus interest from bonds, notes and evidences of indebtedness of any state, including Massachusetts, less deductions, but not the credits, allowable under the provisions of the Internal Revenue Code, except for those deductions relating to dividends received and income or franchise taxes imposed by a state or political subdivision. Carryforwards and carrybacks of net operating losses and capital losses are not allowed.
Due to the legislative change referred to above, beginning in 2010 the Massachusetts financial institution tax rate will decrease by 0.5% each year for three years until 2012, when it will become 9% and will remain at that rate. Westfield Financial’s subsidiaries, Elm Street Securities Corporation and WFD Securities Corporation are taxed as Massachusetts security corporations, and are subject to a state tax rate of 1.32% of gross income.
Westfield Financial’s state tax returns, as well as those of its subsidiaries, are not currently under audit.
28
REGULATION
General
The Office
will result from this change in supervision.
Federal and state regulators also have significant discretion in connection with their supervisory and enforcement activities and examination policies. Any change in such policy, whether by the OTS, the FDIC, the Federal Reserve Board, the OCC, the SEC, the United States Congress, or any other governmental or regulatory authority, could have a material adverse impact on the Bank and Westfield Financial’s operations and shareholders. We also cannot predict what if any changes to our obligations under these statutes and regulations may be made by our new regulators.
29
one borrower.
•
specified liquid assets up to 20% of total assets;
•
goodwill and other intangible assets; and
•
the value of property used to conduct Westfield Bank’s business.
Westfield Bank also may satisfy the qualified thrift lender test by qualifyingmust either qualify as a domestic building and loan association as defined inunder the Internal Revenue Code, or maintain an appropriate level of 1986. If Westfieldcertain investments, called “Qualified Thrift Investments” (“QTIs”), to remain a “Qualified Thrift Lender” (“QTL”). QTIs must represent 65% or more of portfolio assets on a monthly average basis during 9 out of every 12 months on a continuous basis. Failure by the Bank to maintain its status as a QTL would result in the following restrictions on operations: (i) we would not be able to engage in any new activity or make any new investment, directly or indirectly, unless such activity or investment was permissible for both national banks and thrift institutions; (ii) the branching powers of the Bank would be restricted to those of a national bank; and (iii) payment of dividends would be subject to the rules regarding payment of dividends by a national bank. Additional restrictions would apply three years after we ceased to be a QTL, including requirements to dispose of certain assets not permissible for national banks and to cease engaging in activities not permissible for national banks. A thrift institution that fails to maintain its QTL status will be permitted to requalify once, and if it fails the qualified thrift lenderQTL test and is unable to correct that failure for a period ofsecond time, it must either operate under certainwill become immediately subject to all restrictions on its activities or convertdescribed above as if all time periods prior to a bank charter.
Westfield Bank met the qualified thrift lender test atsuch restrictions becoming effective had expired. At December 31, 2008 and in each of2010, our QTL ratio was 80.0%, which exceeded the prior 12 months, and, therefore, is a “qualified thrift lender.”
requirement.
(1)
a tangible capital ratio requirement of 1.5% of total assets as adjusted under Office of Thrift Supervision regulations;
(1) | a tangible capital ratio requirement of 2.0% of total assets as adjusted under OTS regulations; |
(2) | a leverage ratio of 3% of core capital to such adjusted total assets, if a savings association has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; otherwise, the minimum leverage capital ratio for any other depository institution that does not have a composite rating of 1 will be 4%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution; |
(3) | a Tier 1 risk-based capital ratio of 4.0%; and |
30
(4) | a risk-based capital ratio requirement of 8% of core and supplementary capital to total risk-based assets, provided that the amount of supplementary capital used to satisfy this requirement may not exceed the amount of core capital. |
(2)
a leverage ratio requirement of 3% of core capital to such adjusted total assets, if a savings association has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; and
(3)
a risk-based capital ratio requirement of 8% of core and supplementary capital to total risk-based assets, provided that the amount of supplementary capital used to satisfy this requirement may not exceed the amount of core capital.
The minimum leverage capital ratio for any other depository institution that does not have a composite rating of 1 will be 4%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution.
requirements.
|
| Capital | Excess |
|
| (In thousands) |
|
|
|
|
|
Tangible capital | 20.51% | 16,070 | 203,674 |
Core capital | 20.51% | 42,854 | 176,890 |
Risk-based capital | 35.55% | 50,930 | 175,387 |
31
•
a lending test, to evaluate the institution’s record of making loans in its assessment areas;
● | a lending test, to evaluate the institution’s record of making loans in its assessment areas; |
•
an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses in its assessment area or a broader area that includes its assessment area; and
● | an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses in its assessment area or a broader area that includes its assessment area; and |
•
a service test, to evaluate the institution’s delivery of services through its retail banking channels and the extent and innovativeness of its community development services.
● | a service test, to evaluate the institution’s delivery of services through its retail banking channels and the extent and innovativeness of its community development services. |
Westfield
32
In addition, the Office of Thrift Supervision adopted regulations that authorize, but do not require, the Office of Thrift Supervision to order a savings association thatbanking system. The OTS has been given notice that it is not satisfying theseprescribed safety and soundness guidelines relating to (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth, concentration, and quality; (vi) earnings; and (vii) compensation and benefit standards for officers, directors, employees and principal stockholders. A savings institution not meeting one or more of the safety and soundness guidelines may be required to submitfile a compliance plan. If, after being notified, a savings association fails to submit an acceptable plan of compliance or fails in any material respect to implement an accepted plan,with the Office of Thrift Supervision must issue an order directing action to correctOTS.
Prompt Corrective Regulatory Action. Pursuant to the Federal Deposit Insurance Act and the Office of Thrift Supervisiontake prompt corrective action regulations,with respect to insured institutions that fall below the Office“adequately capitalized” level. Any insured depository institution that falls below the “adequately capitalized” level must submit a capital restoration plan, and, if its capital levels further decline or do not increase, will face increased scrutiny and more stringent supervisory action. As of Thrift Supervision is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings associations. For this purpose, a savings association would be placed in one ofDecember 31, 2010, the following four categories based onmost recent notification from the association’s capital:
•
well-capitalized;
33
•
adequately capitalized;
•
undercapitalized; or
•
critically undercapitalized.
When appropriate,OTS categorized us as “well capitalized” under the Office of Thrift Supervision can requireprompt corrective action by a savings and loan holding company under the “prompt corrective action” provisions of the Federal Deposit Insurance Act.
framework.
At December 31, 2008, Westfield Bank met the criteria for being considered “well-capitalized.”
The Office of Thrift Supervision may disapprove of a notice of application if:
•
Westfield Bankyears, or that would cause the thrift institution to be undercapitalized following the distribution;
•
the proposed capital distribution raises safety and soundness concerns; or
•
the capital distribution would violate a prohibition containedless than adequately capitalized. We are currently in any statute, regulation, or agreement.
compliance with this requirement.
Under the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”), which was signed into law on February 15, 2006, the Bank Insurance Fund and the Savings Association Insurance Fund were merged into a new combined fund, called the Deposit Insurance Fund (the “DIF”(“DIF”). The FDIC was also given greater latitude in setting thecurrently maintains a risk-based assessment system under which assessment rates for insured depository institutions which could be used to impose minimum assessments.
34
Pursuant to the Emergency Economic Stabilization Act of 2008, the maximum deposit insurance amount has been increased from $100,000 to $250,000 until December 31, 2009. On October 13, 2008, the FDIC established a Temporary Liquidity Guarantee Program under which the FDIC will fully guarantee all non-interest-bearing transaction accounts and all senior unsecured debt of any insured depository institutions or their qualified holding companies that did not opt out of the program issued between October 14, 2008 and June 30, 2009. Senior unsecured debt includes federal funds purchased and certificates of deposit outstanding to the credit of the bank with a maturity of 30 days or greater.
The FDIC is authorized to set the reserve ratio for the Deposit Insurance Fund annually at between 1.15% and 1.50% of estimated insured deposits. If the Deposit Insurance Fund’s reserves exceed the designated reserve ratio, the FDIC is required to pay out all or, if the reserve ratio is less than 1.50%, a portion of the excess as a dividend to insured depository institutionsvary based on the percentagelevel of insured deposits held on December 31, 1996 adjusted for subsequently paid premiums. Insured depository institutions that were in existence on December 31, 1996 and paid assessments prior to that date (or their successors) are entitled to a one-time credit against future assessments based on their past contributions to the BIF or SAIF. At December 31, 2008, Westfield Bank’s credit was substantially utilized to offset its 2008 deposit insurance assessment.
Pursuant to the Reform Act, the FDIC has determined to maintain the designated reserve ratio at its current 1.25%. The FDIC has also adopted a new risk-based premium system that provides for quarterly assessments based on an insured institution’s ranking in one of four risk categories based on their examination ratings and capital ratios. Under these regulations, all insured depository institutions are placed into one of four risk categories. Westfield Bank is in Risk Category I, the most favorable category. As of January 1, 2009, all insured institutions will pay a base rate assessment of 12 to 50 basis points for the first quarter of 2009 of assessable deposits based on the risk of loss to the DIF posed by the particular institution.
Institutions, such as Westfield Bank, in Risk Category I will be assessed within a range of 12 to 14 basis points for the first quarter of 2009. This is a substantial increase from the base rate assessment of 2 to 4 basis points that was in effect during 2008. The increase in the base rate assessment from 2008 to 2009 is dueinstitution to the financial crises affectingDIF. The assessment rate may, therefore, change when that level of risk changes.
On February 27, 2009, the FDIC issued new rules to take effect April 1, 2009 that will change the way the FDIC differentiates risk and appropriate assessment rates. Base assessment rates set to take effect on April 1, 2009 will range from 12 to 45 basis points, but giving effect to certain risk adjustments in the rule issued by the FDIC on February 27, 2009, assessments may range from 7 to 77.5 basis points.average consolidated total assets minus average tangible equity. In addition, the rule suspends FDIC also issued an interimdividend payments if the DIF reserve ratio exceeds 1.5 percent but provides for decreasing assessment rates when the DIF reserve ratio reaches certain thresholds.
2011.
35
Due to the full utilization of the Bank’s credit and the systemic increase in deposit insurance assessments, Westfield Bank will be subject to increased deposit premium expenses in future periods.
The FDIC’s FICO assessment authority is separate from its authority to assess risk-based premiums for deposit insurance. The FICO assessment rate is adjusted quarterly to reflect changes in the assessment bases of the fund and is not risk-based by institution. The FICO assessment rate for the first quarter of 2011, due December 30, 2010, was 0.0102% of insured deposits.
36
Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among financial institutions, bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act. Among other requirements,provisions, the USA PATRIOT Act imposesand the following obligations on financial institutions:
•
financial institutions must establish anti-money laundering programs that include, at minimum: (i) internal policies, procedures,related regulations of the OTS and controls, (ii) specific designationthe United States Department of an anti-money laundering compliance officer, (iii) ongoing employee training programs, and (iv) an independent audit function to test the anti-money laundering program;
•
financial institutions must establish and meet minimum standards for customer due diligence, identification and verification;
•
financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accountsTreasury require savings banks operating in the United States for non-United States persons or their representatives (including foreign individuals visitingto supplement and enhance the United States) must establish appropriate, specific, and, where necessary, enhancedanti-money laundering compliance programs, due diligence policies procedures, and controls designed to detect and report money laundering through those accounts;
•
financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and are subject to certain recordkeeping obligations with respect to correspondent accounts of foreign banks; and
•
bank regulators are directed to consider a depository institution’s or holding company’s effectiveness in combating money laundering when ruling on Federal Reserverequired by the Bank Secrecy Act and Bank Merger Act applications.
37
Office of Foreign AssetAssets Control. Westfield Bank regulations to ensure the detection and reporting of money laundering.
regulated by the OTS.
Holding Company Regulation
•
furnishing or performing management services for a savings institution subsidiary of such holding company;
•
conducting an insurance agency or escrow business;
•
holding, managing, or liquidating assets owned or acquired from a savings association subsidiary of such company;
•
holding or managing properties used or occupied by a savings association subsidiary of such company;
•
acting as trustee under a deed of trust;
•
any other activity (i) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the Director of the Office of Thrift Supervision, by regulation, prohibits or limits any such activity for savings and loan holding companies, or (ii) in which multiple savings and loan holding companies were authorized by regulation to directly engage in on March 5, 1987;
•
purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such holding company is approved by the Director of the Office of Thrift Supervision; and
•
any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act.
38
Permissible activities which are deemed to be financial in nature or incidental thereto under Section 4(k) of the Bank Holding Company Act include:
•
lending, exchanging, transferring, investing for others, or safeguarding money or securities;
•
insurance activities or providing and issuing annuities, and acting as principal, agent, or broker;
•
financial, investment, or economic advisory services;
•
issuing or selling instruments representing interests in pools of assets that a bank is permitted to hold directly;
•
underwriting, dealing in, or making a market in securities;
•
activities previously determined by the Federal Reserve Board to be closely related to banking;
•
activities that bank holding companies are permitted to engage in outside of the U.S.; and
•
portfolio investments made by an insurance company.
In addition, we cannot be acquired unless the acquirer is generally engaged solely in financial activities.
•
control (as defined under the Home Owners’ Loan Act) of another savings association (or a holding company parent) without prior Office of Thrift Supervision approval;
•
through merger, consolidation, or purchase of assets, another savings association or a holding company thereof, or acquiring all or substantially allmanagerial resources of the assetsacquirer, the competitive effects of such savings association (orthe proposed acquisition and any adverse effect on the DIF. If a holding company) without prior Officecompany, an individual who owns or controls more than 25% of Thrift Supervision approval; or
•
controlthe voting shares of any depository institution not insured by the FDIC (except through a merger with and into the holding company’s savings association subsidiary that is approved by the Office of Thrift Supervision).
39
A savings and loan holding company may not acquire asor a separate subsidiarydirector or officer of a savings association that has a principal office outside of the state where the principal office of its subsidiary savings association is located, except:
•
in the case of certain emergency acquisitions approved by the FDIC;
•
if such holding company controls a savings association subsidiary that operated a home or branch office in such additional state as of March 5, 1987; or
•
if the laws of the state in which the savings association to be acquired is located specifically authorize a savings association chartered by that state to be acquired by a savings association chartered by the state where the acquiring savings association or savings and loan holding company is located or by a holding company that controls such a state-chartered association.
Federal Securities Laws. Westfield Financial’s common stock is registered withseeks to acquire control of us, an application for approval must be submitted to the Securities and Exchange Commission under Section 12(b)OTS instead of the Securities Exchange Act of 1934, as amended, and Westfield Financial is subject to information, proxy solicitation, insider trading restrictions, and other requirements undernotice described above. In reviewing an application, the Securities Exchange Act of 1934, as amended.
The Sarbanes-Oxley Act. As a public company, Westfield Financial is subject to the Sarbanes-Oxley Act of 2002 (the “Act”), which implements a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing. In general, the Sarbanes-Oxley Act mandated important new corporate governance and financial reporting requirements intended to enhance the accuracy and transparency of public companies’ reported financial results. It established new responsibilities for corporate chief executive officers, chief financial officers and audit committees in the financial reporting process, and it created a new regulatory body to oversee auditors of public companies. It backed these requirements with new SEC enforcement tools, increased criminal penalties for federal mail, wire and securit ies fraud, and created new criminal penalties for document and record destruction in connection with federal investigations. It also increased the opportunity for more private litigation by lengthening the statute of limitations for securities fraud claims and providing new federal corporate whistleblower protection.
Section 402 of the Act prohibits the extension of personal loans to directors and executive officers of issuers (as defined in the Sarbanes-Oxley Act). The prohibition, however, does not apply to mortgages advanced by an insured depository institution, such as Westfield Bank, that are subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act.
The Act also required that the various securities exchanges, including The Nasdaq Stock Market, prohibit the listing of the stock of an issuer unless that issuer complies with various requirements relating to their committees and the independence of their directors that serve on those committees.
40
Quotation on Nasdaq. Westfield Financial’s common stock is quoted on The Nasdaq Stock Market. In order to maintain such quotation, Westfield Financial is subject to certain corporate governance requirements, including:
•
a majority of its board must be composed of independent directors;
•
itOTS is required to have an audit committee composedtake into consideration certain statutory factors in addition to those considered under the Change in Bank Control Act, including the convenience and needs of at least three directors, each of whom is an independent director, as such term is defined by the Nasdaq Marketplace Rules and by the Exchange Act regulations;
•
its nominating committee and compensation committee must alsocommunity to be composed entirely of independent directors; and
served.
•
each of its audit committee and nominating committee must have a publicly available written charter.
furnished to the SEC.
RISK FACTORS |
41
ITEM 1A.
RISK FACTORS
•
Commercial and Industrial Loans.Repayment is generally dependent upon the successful operation of the borrower's business.
● | Commercial and Industrial Loans. Repayment is generally dependent upon the successful operation of the borrower's business. |
•
Commercial Real Estate Loans.Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.
● | Commercial Real Estate Loans. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. |
•
Consumer Loans.Consumer loans are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage or loss.
● | Consumer Loans. Consumer loans are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage or loss. |
42
Material additions to our allowance for loan losses also would materially decrease our net income, and the charge-off of loans may cause us to increase the allowance. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors, in determining the amount of the allowance for loan losses. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.
43
44
Recent legislative
reserves to insured deposits. The FDIC adopted a revised risk-based deposit insurance premiums have increased andassessment schedule on February 27, 2009, which raised deposit insurance premiums. On May 22, 2009, the FDIC also implemented a five basis point special assessment of each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009, but no more than 10 basis points times the institution’s assessment base for the second quarter of 2009, which was collected on September 30, 2009. Additional special assessments may increase furtherbe imposed by the FDIC for future periods.
Pursuant to the EESA, the maximum deposit insurance amount has been increased from $100,000 to $250,000 until December 31, 2009, and certain types of deposit accounts will have unlimited deposit insurance coverage through that date. On October 13, 2008, the FDIC established a Temporary Liquidity Guarantee Program under which the FDIC will fully guarantee all non-interest-bearing transaction accounts and all senior unsecured debt of any insured depository institutions or their qualified holding companies that did not opt out of the program issued between October 14, 2008 and June 30, 2009. Senior unsecured debt includes federal funds purchased and certificates of deposit outstanding to the credit of the bank with a maturity of 30 days or greater. These increases have increased the aggregate amount of deposits that the FDIC insures and thus have exposed the FDIC’s deposit insurance fund to potentially gre ater losses. Westfield Bank will be subject to increased deposit premium expenses in 2009 and futures years which may have an adverse impact on our results of operations.
financial institution.
45
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
46
UNRESOLVED STAFF COMMENTS |
None. |
Location | Ownership | Year | Year of Lease or |
|
|
|
|
Main Office: |
|
|
|
|
|
|
|
141 Elm St. | Owned | 1964 | N/A |
|
|
|
|
Branch Offices: |
|
|
|
|
|
|
|
206 Park St. | Owned | 1957 | N/A |
|
|
|
|
655 Main St. | Owned | 1968 | N/A |
|
|
|
|
26 Arnold St. | Owned | 1976 | N/A |
|
|
|
|
300 Southampton Rd. | Owned | 1987 | N/A |
|
|
|
|
462 College Highway | Owned | 1990 | N/A |
|
|
|
|
382 North Main St. | Leased | 1997 | 2012 |
|
|
|
|
1500 Main St. | Leased | 2006 | 2016 |
|
|
|
|
1642 Northampton St. | Owned | 2001 | N/A |
|
|
|
|
1342 Liberty St. | Owned | 2001 | N/A |
|
|
|
|
560 East Main St. | Leased | 2007 | 2046 |
|
|
|
|
ATMs: |
|
|
|
|
|
|
|
337 N. Westfield St. | Leased | 1988 | 2013 |
|
|
|
|
516 Carew St. | Tenant at will | 2002 | N/A |
|
|
|
|
1000 State St. | Tenant at will | 2003 | N/A |
|
|
|
|
788 Memorial Ave. | Leased | 2006 | 2016 |
|
|
|
|
2620 Westfield St. | Leased | 2006 | 2020 |
|
|
|
|
98 Southwick Rd. | Leased | 2006 | 2021 |
Location | Ownership | Year Opened | Year of Lease or License Expiration |
Main Office: | |||
141 Elm St. | Owned | 1964 | N/A |
Westfield, MA | |||
Branch Offices: | |||
206 Park St. | Owned | 1957 | N/A |
West Springfield, MA | |||
655 Main St. | Owned | 1968 | N/A |
Agawam, MA | |||
26 Arnold St. | Owned | 1976 | N/A |
Westfield, MA | |||
300 Southampton Rd. | Owned | 1987 | N/A |
Westfield, MA | |||
462 College Highway | Owned | 1990 | N/A |
Southwick, MA | |||
382 North Main St. | Leased | 1997 | 2012 |
E. Longmeadow, MA | |||
1500 Main St. | Leased | 2006 | 2016 |
Springfield, MA | |||
1642 Northampton St. | Owned | 2001 | N/A |
Holyoke, MA | |||
560 East Main St. | Leased | 2007 | 2046 |
Westfield, MA | |||
241 South Westfield St. | Leased | 2009 | 2038 |
Feeding Hill, MA |
ATMs: | |||
337 N. Westfield St. | Leased | 1988 | 2013 |
Feeding Hills, MA | |||
516 Carew St. | Tenant at will | 2002 | N/A |
Springfield, MA | |||
1000 State St. | Tenant at will | 2003 | N/A |
Springfield, MA | |||
788 Memorial Ave. | Leased | 2006 | 2016 |
West Springfield, MA | |||
2620 Westfield St. | Leased | 2006 | 2020 |
West Springfield, MA | |||
98 Southwick Rd. | Leased | 2006 | 2021 |
Westfield, MA | |||
115 West Silver St. | Tenant at will | 2005 | N/A |
Westfield, MA | |||
1342 Liberty St. | Owned | 2001 | N/A |
Springfield, MA | |||
98 Lower Westfield Rd. | Leased | 2010 | 2020 |
Holyoke, MA | |||
Westfield State University | |||
577 Western Ave. | |||
Westfield, MA | |||
Woodward Center | Leased | 2010 | 2015 |
Wilson Hall | Leased | 2010 | 2015 |
Ely Hall | Leased | 2010 | 2015 |
47
ITEM 3.
LEGAL PROCEEDINGS
Westfield Financial is
LEGAL PROCEEDINGS |
[REMOVED AND RESERVED] |
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Effective on August 21, 2007, Westfield Financial switched the listing of its
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
On January 3, 2007, Westfield Financial completed its stock offering in connection with the second step conversion of Westfield Mutual Holding Company. As part of the conversion, New Westfield Financial, Inc. succeeded Westfield Financial as the stock holding company of Westfield Bank, and Westfield Mutual Holding Company was dissolved. In the stock offering, a total of 18,400,000 shares representing Westfield Mutual Holding Company’s ownership interest in Westfield Financial were sold by New Westfield Financial in a subscription offering, community offering and syndicated offering. In addition, each outstanding share of Westfield Financial as of January 3, 2007 was exchanged for 3.28138 new shares of New Westfield Financial common stock. New Westfield Financial, Inc. changed its name to Westfield Financial, Inc. effective January 3, 2007.
|
| Price Per Share |
| Cash | ||
For the Year Ended December 31, 2008 |
| High |
| Low |
|
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2008 |
| $ 10.36 |
| $ 8.89 |
| $ 0.30 |
Third Quarter ended September 30, 2008 |
| 11.30 |
| 8.76 |
| 0.05 |
Second Quarter ended June 30, 2008 |
| 9.86 |
| 9.05 |
| 0.20 |
First Quarter ended March 31, 2008 |
| 10.53 |
| 8.95 |
| 0.05 |
|
|
|
|
|
|
|
|
| Price Per Share |
| Cash | ||
For the Year Ended December 31, 2007 |
| High |
| Low |
|
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2007 |
| $ 10.18 |
| $ 9.49 |
| $ 0.25 |
Third Quarter ended September 30, 2007 |
| 10.25 |
| 8.73 |
| 0.05 |
Second Quarter ended June 30, 2007 |
| 10.83 |
| 9.97 |
| 0.05 |
First Quarter ended March 31, 2007 |
| 11.02 |
| 10.16 |
| 0.05 |
49
A quarterly
Price Per Share | Cash Dividends Declared | |||||||||||
2010 | High ($) | Low ($) | ($) | |||||||||
Fourth Quarter ended December 31, 2010 | 9.37 | 7.70 | 0.21 | * | ||||||||
Third Quarter ended September 30, 2010 | 8.84 | 7.33 | 0.06 | |||||||||
Second Quarter ended June 30, 2010 | 10.12 | 7.95 | 0.20 | * | ||||||||
First Quarter ended March 31, 2010 | 9.25 | 7.98 | 0.05 |
Price Per Share | Cash Dividends Declared | |||||||||||
2009 | High ($) | Low ($) | ($) | |||||||||
Fourth Quarter ended December 31, 2009 | 8.50 | 7.85 | 0.20 | * | ||||||||
Third Quarter ended September 30, 2009 | 9.82 | 8.43 | 0.05 | |||||||||
Second Quarter ended June 30, 2009 | 9.86 | 8.62 | 0.20 | * | ||||||||
First Quarter ended March 31, 2009 | 10.34 | 8.27 | 0.05 |
2010.
50
Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares that May Yet Be Purchased Under the Program (1) | ||||||||||||
October 1 - 31, 2010 | 61,882 | (2) | 7.94 | 33,947 | 1,666,031 | |||||||||||
November 1 - 30, 2010 | 111,844 | 8.01 | 111,844 | 1,554,187 | ||||||||||||
December 1 - 31, 2010 | 1,671 | 8.25 | 1,671 | 1,552,516 | ||||||||||||
Total | 175,397 | 7.99 | 147,462 | 1,552,516 | ||||||||||||
(1) | On May 25, 2010, the Board of Directors voted to authorize the commencement of a repurchase program, authorizing the repurchase of 2,924,367 shares, or ten percent of its outstanding shares of common stock. |
(2) | In October 2010, we repurchased 27,935 shares from certain executives as repayment of their tax obligations for shares of restricted stock that vested on October 20, 2010 under our 2002 and 2007 Recognition and Retention Plans. These repurchases were reported by each reporting person on October 20, 2010. |
| Period Ending | |||||
Index | 12/31/03 | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 |
Westfield Financial, Inc. | 100.00 | 110.16 | 106.29 | 158.82 | 152.10 | 171.81 |
Russell 2000 | 100.00 | 118.33 | 123.72 | 146.44 | 144.15 | 95.44 |
NASDAQ Bank | 100.00 | 110.99 | 106.18 | 117.87 | 91.85 | 69.88 |
51
Period Ending | ||||||||||||||||||||||||
Index | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 | ||||||||||||||||||
Westfield Financial, Inc. | 100.00 | 149.42 | 143.10 | 161.64 | 136.74 | 163.05 | ||||||||||||||||||
Russell 2000 | 100.00 | 118.37 | 116.51 | 77.15 | 98.11 | 124.46 | ||||||||||||||||||
NASDAQ Bank | 100.00 | 113.82 | 91.16 | 71.52 | 59.87 | 68.34 |
| At December 31, | ||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| (In thousands) | ||||||||
Selected Financial Condition Data: |
|
|
|
|
|
|
|
|
|
Total assets | $1,109,056 |
| $1,039,784 |
| $ 996,829 |
| $ 805,095 |
| $ 796,903 |
Loans, net(1) | 472,135 |
| 414,902 |
| 385,184 |
| 378,837 |
| 368,601 |
Securities available for sale | 24,396 |
| 38,051 |
| 41,687 |
| 28,321 |
| 14,968 |
Securities held to maturity | 79,303 |
| 104,025 |
| 77,299 |
| 73,323 |
| 71,298 |
Mortgage-backed securities available for sale | 233,747 |
| 206,178 |
| 126,942 |
| 101,138 |
| 73,316 |
Mortgage-backed securities held to maturity | 168,332 |
| 174,594 |
| 163,093 |
| 152,127 |
| 175,302 |
Deposits | 588,029 |
| 602,676 |
| 627,466 |
| 623,045 |
| 612,621 |
Short-term borrowings | 49,824 |
| 32,268 |
| 17,919 |
| 14,441 |
| 14,615 |
Long-term debt | 173,300 |
| 105,000 |
| 55,000 |
| 45,000 |
| 45,000 |
Total stockholders’ equity (2) | 259,919 |
| 286,532 |
| 289,408 |
| 115,842 |
| 118,051 |
Allowance for loan losses | 8,796 |
| 5,726 |
| 5,437 |
| 5,422 |
| 5,277 |
Nonperforming loans | 8,805 |
| 1,202 |
| 1,028 |
| 1,919 |
| 2,171 |
|
|
|
|
|
|
|
|
|
|
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| (In thousands, except per share data) | ||||||||
Selected Operating Data: |
|
|
|
|
|
|
|
|
|
Interest and dividend income | $ 54,056 |
| $ 53,584 |
| $ 42,435 |
| $ 37,306 |
| $ 34,428 |
Interest expense | 22,304 |
| 23,408 |
| 19,551 |
| 13,597 |
| 10,913 |
Net interest and dividend income | 31,752 |
| 30,176 |
| 22,884 |
| 23,709 |
| 23,515 |
Provision for loan losses | 3,453 |
| 400 |
| 390 |
| 465 |
| 750 |
Net interest and dividend income after |
|
|
|
|
|
|
|
|
|
provision for loan losses | 28,299 |
| 29,776 |
| 22,494 |
| 23,244 |
| 22,765 |
Total noninterest income | 3,520 |
| 4,561 |
| 3,073 |
| 3,372 |
| 3,896 |
Total noninterest expense | 23,333 |
| 21,825 |
| 19,390 |
| 18,464 |
| 17,776 |
Income before income taxes | 8,486 |
| 12,512 |
| 6,177 |
| 8,152 |
| 8,885 |
Income taxes | 1,795 |
| 3,812 |
| 1,523 |
| 1,933 |
| 2,562 |
Net income | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
| $ 6,219 |
| $ 6,323 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
| $ 0.20 |
| $ 0.20 |
Diluted earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
| $ 0.20 |
| $ 0.20 |
|
|
|
|
|
|
|
|
|
|
Dividends per share paid (3) | $ 0.60 |
| $ 0.40 |
| $ 0.32 |
| $ 0.27 |
| $ 0.10 |
(1)
Loans are shown net of deferred loan costs, allowance for loan losses and unadvanced loan funds.
(2)
Stockholders’ equity includes $171.7 million in capital from the net proceeds raised in the stock offering. Westfield Financial completed its second step stock offering on January 3, 2007. Consequently, the proceeds were recognized by Westfield Financial and reported in its balance sheet as of December 31, 2006. Proceeds, net of stock issuance costs, received directly by Westfield Financial or held by the underwriter for the convenience of Westfield Financial were recorded by increasing cash, the capital stock, and the paid-in capital accounts.
(3)
Per share amounts related to periods prior to the date of completion of the conversion (January 3, 2007) have been restated to give retroactive recognition to the exchange ratio applied in the conversion.
At December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Selected Financial Condition Data: | ||||||||||||||||||||
Total assets | $ | 1,239,489 | $ | 1,191,410 | $ | 1,109,056 | $ | 1,039,784 | $ | 996,829 | ||||||||||
Loans, net (1) | 502,392 | 469,149 | 472,135 | 414,902 | 385,184 | |||||||||||||||
Securities available for sale | 644,139 | 319,121 | 258,143 | 244,229 | 168,629 | |||||||||||||||
Securities held to maturity (2) | - | 295,011 | 247,635 | 278,619 | 240,392 | |||||||||||||||
Deposits | 700,335 | 647,975 | 588,029 | 602,676 | 627,466 | |||||||||||||||
Short-term borrowings | 62,937 | 74,499 | 49,824 | 32,268 | 17,919 | |||||||||||||||
Long-term debt | 238,151 | 213,845 | 173,300 | 105,000 | 55,000 | |||||||||||||||
Total stockholders’ equity | 221,245 | 247,299 | 259,919 | 286,532 | 289,408 | |||||||||||||||
Allowance for loan losses | 6,934 | 7,645 | 8,796 | 5,726 | 5,437 | |||||||||||||||
Nonperforming loans | 3,204 | 5,470 | 8,805 | 1,202 | 1,028 | |||||||||||||||
For the Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Selected Operating Data: | ||||||||||||||||||||
Interest and dividend income | $ | 46,147 | $ | 52,530 | $ | 54,056 | $ | 53,584 | $ | 42,435 | ||||||||||
Interest expense | 16,765 | 20,022 | 22,304 | 23,408 | 19,551 | |||||||||||||||
Net interest and dividend income | 29,382 | 32,508 | 31,752 | 30,176 | 22,884 | |||||||||||||||
Provision for loan losses | 8,923 | 3,900 | 3,453 | 400 | 390 | |||||||||||||||
Net interest and dividend income after provision for loan losses | 20,459 | 28,608 | 28,299 | 29,776 | 22,494 | |||||||||||||||
Total noninterest income | 7,390 | 3,218 | 3,579 | 4,609 | 3,123 | |||||||||||||||
Total noninterest expense | 24,809 | 25,100 | 23,392 | 21,873 | 19,440 | |||||||||||||||
Income before income taxes | 3,040 | 6,726 | 8,486 | 12,512 | 6,177 | |||||||||||||||
Income taxes | 34 | 1,267 | 1,795 | 3,812 | 1,523 | |||||||||||||||
Net income | $ | 3,006 | $ | 5,459 | $ | 6,691 | $ | 8,700 | $ | 4,654 | ||||||||||
Basic earnings per share (3) | $ | 0.11 | $ | 0.19 | $ | 0.22 | $ | 0.29 | $ | 0.15 | ||||||||||
Diluted earnings per share (3) | $ | 0.11 | $ | 0.18 | $ | 0.22 | $ | 0.28 | $ | 0.15 | ||||||||||
Dividends per share paid (3) | $ | 0.52 | $ | 0.50 | $ | 0.60 | $ | 0.40 | $ | 0.32 |
_________________________________ | |||||||||
(1) Loans are shown net of deferred loan costs, allowance for loan losses and unadvanced loan funds. | |||||||||
(2) In August 2010, we transferred all of our held-to-maturity securities to the available-for-sale category. We determined that we no longer had the positive intent to hold our securities classified as held-to-maturity for an indefinite period of time because of our desire to have more flexibility in managing the investment portfolio. The securities transferred had a total amortized cost of $287.1 million, fair value of $299.7 million and a net unrealized gain of $12.6 million, which was recorded as other comprehensive income at the time of transfer. | |||||||||
(3) Per share amounts related to periods prior to the date of completion of the conversion (January 3, 2007) have been restated to give retroactive recognition to the exchange ratio applied in the conversion. |
At or for the Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Selected Financial Ratios and | ||||||||||||||||||||
Other Data(1) | ||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Return on average assets | 0.25 | % | 0.47 | % | 0.63 | % | 0.86 | % | 0.56 | % | ||||||||||
Return on average equity | 1.25 | 2.12 | 2.43 | 3.00 | 3.99 | |||||||||||||||
Average equity to average assets | 19.63 | 22.16 | 25.75 | 28.74 | 14.08 | |||||||||||||||
Equity to total assets at end of year | 17.85 | 20.76 | 23.44 | 27.56 | 29.03 | |||||||||||||||
Average interest rate spread | 2.22 | 2.41 | 2.44 | 2.23 | 2.61 | |||||||||||||||
Net interest margin (2) | 2.64 | 3.04 | 3.23 | 3.25 | 3.05 | |||||||||||||||
Average interest-earning assets to average interest-earning liabilities | 128.51 | 134.62 | 135.36 | 141.05 | 117.37 | |||||||||||||||
Total noninterest expense to average assets | 2.03 | 2.16 | 2.18 | 2.16 | 2.34 | |||||||||||||||
Efficiency ratio (3) | 75.53 | 68.49 | 65.83 | 64.55 | 73.68 | |||||||||||||||
Dividend payout ratio | 4.73 | 2.63 | 2.73 | 1.38 | 2.13 | |||||||||||||||
Regulatory Capital Ratios: | ||||||||||||||||||||
Total risk-based capital | 34.05 | 38.07 | 42.56 | 50.29 | 29.07 | |||||||||||||||
Tier 1 risk-based capital | 33.03 | 36.94 | 41.31 | 49.30 | 54.38 | |||||||||||||||
Tier 1 leverage capital | 18.07 | 20.92 | 23.97 | 27.48 | 55.39 | |||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
Nonperforming loans to total loans | 0.63 | 1.15 | 1.83 | 0.29 | 0.26 | |||||||||||||||
Nonperforming assets to total assets | 0.28 | 0.60 | 0.79 | 0.12 | 0.10 | |||||||||||||||
Allowance for loan losses to total loans | 1.36 | 1.60 | 1.83 | 1.36 | 1.39 | |||||||||||||||
Allowance for loan losses to nonperforming assets | 202 | 107 | 100 | 476 | 529 | |||||||||||||||
Number of: | ||||||||||||||||||||
Banking offices | 11 | 11 | 11 | 11 | 10 | |||||||||||||||
Full-time equivalent employees | 180 | 168 | 180 | 177 | 155 | |||||||||||||||
_________________________________ | ||||||||||||||||||||
(1) Asset quality ratios and regulatory capital ratios are end of period ratios. | ||||||||||||||||||||
(2) Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest earning assets. | ||||||||||||||||||||
(3) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income less gain on sale and losses on other than temporary impairment of securities and sale of premises and equipment. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
52
| At or for the Years Ended December 31, | |||||||||||||
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Ratios and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets | 0.63 | % |
| 0.86 | % |
| 0.56 | % |
| 0.77 | % |
| 0.79 | % |
Return on average equity (2) | 2.43 |
|
| 3.00 |
|
| 3.99 |
|
| 5.27 |
|
| 5.24 |
|
Average equity to average assets (2) | 25.75 |
|
| 28.74 |
|
| 14.08 |
|
| 14.66 |
|
| 15.14 |
|
Equity to total assets at end of year (3) | 23.44 |
|
| 27.56 |
|
| 29.03 |
|
| 14.39 |
|
| 14.83 |
|
Average interest rate spread | 2.44 |
|
| 2.23 |
|
| 2.61 |
|
| 2.89 |
|
| 2.94 |
|
Net interest margin (4) | 3.23 |
|
| 3.25 |
|
| 3.05 |
|
| 3.24 |
|
| 3.25 |
|
Average interest-earning assets to average | 135.36 |
|
| 141.05 |
|
| 117.37 |
|
| 119.22 |
|
| 121.47 |
|
Total noninterest expense to | 2.18 |
|
| 2.16 |
|
| 2.34 |
|
| 2.29 |
|
| 2.24 |
|
Efficiency ratio (5) | 65.77 |
|
| 63.91 |
|
| 73.63 |
|
| 68.23 |
|
| 66.99 |
|
Dividend payout ratio | 2.61 |
|
| 1.38 |
|
| 2.13 |
|
| 1.35 |
|
| 0.50 |
|
Regulatory Capital Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital | 42.56 |
|
| 50.29 |
|
| 29.07 |
|
| 14.48 |
|
| 14.69 |
|
Tier 1 risk-based capital | 41.31 |
|
| 49.30 |
|
| 54.38 |
|
| 24.54 |
|
| 25.75 |
|
Tier 1 leverage capital | 23.97 |
|
| 27.48 |
|
| 55.39 |
|
| 25.68 |
|
| 26.90 |
|
Asset Quality Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as a percent of | 1.83 |
|
| 0.29 |
|
| 0.26 |
|
| 0.50 |
|
| 0.58 |
|
Nonperforming assets as a percent of | 0.79 |
|
| 0.12 |
|
| 0.10 |
|
| 0.24 |
|
| 0.27 |
|
Allowance for loan losses as a percent of | 1.83 |
|
| 1.36 |
|
| 1.39 |
|
| 1.41 |
|
| 1.41 |
|
Allowance for loan losses as a percent of | 100 |
|
| 476 |
|
| 529 |
|
| 283 |
|
| 243 |
|
Number of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking offices | 11 |
|
| 11 |
|
| 10 |
|
| 10 |
|
| 10 |
|
Full-time equivalent employees | 180 |
|
| 177 |
|
| 155 |
|
| 142 |
|
| 144 |
|
____________________________
(1)
Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.
(2)
Average equity includes $171.7 million in capital from the net proceeds raised in the stock offering. Westfield Financial completed its second step stock offering on January 3, 2007. Consequently, the proceeds were recognized by Westfield Financial and reported in its balance sheet as of December 31, 2006 and therefore affected the balance of stockholders’ equity for one calendar day. Proceeds, net of stock issuance costs, received directly by Westfield Financial or held by the underwriter for the convenience of Westfield Financial were recorded by increasing cash, the capital stock, and the paid-in capital accounts.
(3)
Stockholders’ equity includes $171.7 million in capital from the net proceeds raised in the stock offering. Westfield Financial completed its second step stock offering on January 3, 2007. Consequently, the proceeds were recognized by Westfield Financial and reported in its balance sheet as of December 31, 2006. Proceeds, net of stock issuance costs, received directly by Westfield Financial or held by the underwriter for the convenience of Westfield Financial were recorded by increasing cash, the capital stock, and the paid-in capital accounts.
(4)
Net interest margin represents tax equivalent net interest and dividend income as a percentage of average interest earning assets.
(5) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income less gain on sale and losses on other than temporary impairment of securities and sale of premises and equipment.
53
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On January 3, 2007, Westfield Financial completed its stock offering in connection with the second step conversion of Westfield Mutual Holding Company. As part of the conversion, New Westfield Financial, Inc. succeeded Westfield Financial as the stock holding company of Westfield Bank, and Westfield Mutual Holding Company was dissolved. In the stock offering, a total of 18,400,000 shares representing Westfield Mutual Holding Company’s ownership interest in Westfield Financial were sold by New Westfield Financial in a subscription offering, community offering and syndicated offering. In addition, each outstanding share of Westfield Financial as of January 3, 2007 was exchanged for 3.28138 new shares of New Westfield Financial common stock. New Westfield Financial, Inc. changed its name to Westfield Financial, Inc. effective January 3, 2007. Proceeds, net of stock issuance costs, were approximately $171.7 million.
Westfield Financial has
● | grow our commercial and industrial and commercial real estate loan portfolio by targeting businesses in our primary market area and in northern Connecticut as a means to increase the yield on and diversify our loan portfolio and build transactional deposit account relationships; |
● | focus on expanding our retail banking franchise and increase the number of households served within our market area; and |
•
continue to grow its commercial and industrial and commercial real estate loan portfolio by targeting businesses in its primary market area and in northern Connecticut as a means to increase the yield on and diversify its loan portfolio and build transactional deposit account relationships;
● | to supplement the commercial focus, grow the residential loan portfolio to diversify risk and deepen customer relationships. We will maintain our arrangement with a third-party mortgage company which assists in originating and servicing residential real estate loans. By doing this, we reduce the overhead costs associated with these loans. |
•
focus on expanding its retail banking franchise and increase the number of households served within its market area; and
•
depending on market conditions, refer substantially all of the fixed-rate residential real estate loans to a third party mortgage company which underwrites, originates and services these loans in order to diversify its loan portfolio, increase fee income and reduce interest rate risk.
54
•
Net income was $6.7 million, or $0.23 per diluted share, for the year ended December 31, 2008 compared to $8.7 million, or $0.29 per diluted share for the same period in 2007. The results for the year ended December 31, 2008 showed increases in net interest income and a lower provision for income taxes; however this was offset by an increase in the provision for loan losses and noninterest expenses and a decrease in noninterest income.
•
Westfield Bank provided $3.5 million for loan losses for the year ended December 31, 2008, compared to $400,000 for the same period in 2007. This was the result of an increase in nonperforming loans, an increase in commercial and industrial loans and commercial real estate loans, and an increase in charged-off loans. The allowance was $8.8 million, or 1.83% of total loans, at December 31, 2008 and $5.7 million, or 1.36% of total loans, at December 31, 2007.
•
Net interest income increased $1.6 million to $31.8 million for the year ended December 31, 2008, compared to $30.2 million for the same period in 2007. The net interest margin, on a tax equivalent basis, was 3.23% for the year ended December 31, 2008, compared to 3.25% for the same period in 2007. The increase in net interest income was primarily due to increases in average earning assets of $56.1 million for the year ended December 31, 2008. Also contributing to the increase in net interest income was a decrease in the cost of interest-bearing liabilities. The cost of interest-bearing liabilities decreased 48 basis points to 3.02% for the year ended December 31, 2008 compared to the same period in 2007.
•
The year ended December 31, 2008 also includes a net loss of $205,000 on the sale and write-down of securities. Westfield Financial recorded write-downs of $1.3 million on securities deemed to be other than temporary impaired. This was primarily due to write-downs of $961,000 on preferred stock issued by Freddie Mac. 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 December 31, 2008. The write-downs were partially offset by net gains of $1.1 million for the year ended December 31, 2008 on the sale of other investment securities.
•
Net loans increased by $57.2 million, to $472.1 million at December 31, 2008 from $414.9 million at December 31, 2007. The increase in net loans was primarily the result of an increase in commercial and industrial loans and commercial real estate loans. Commercial and industrial loans increased $37.3 million to $153.9 million at December 31, 2008 from $116.5 million at December 31, 2007. Commercial real estate loans increased $33.9 million to $223.9 million at December 31, 2008 from $190.0 million at December 31, 2007.
•
Nonperforming loans increased $7.6 million to $8.8 million at December 31, 2008 compared to $1.2 million at December 31, 2007. This represented 1.83% of total loans at December 31, 2008 and 0.29% of total loans at December 31, 2007. The increase was primarily the result of a manufacturing commercial loan relationship of $5.5 million and an agricultural commercial loan relationship of $1.7 million.
55
● | Net income was $3.0 million, or $0.11 per diluted share, for the year ended December 31, 2010, compared to $5.5 million, or $0.18 per diluted share for the same period in 2009. The results for the year ended December 31, 2010 showed an increase in the provision for loan losses and a decrease in net interest income; however, this was offset by an increase in noninterest income and a decrease in noninterest expense and the provision for income taxes. |
● | We provided $8.9 million for loan losses for the year ended December 31, 2010, compared to $3.9 million for the same period in 2009. This was the result of an increase in net loan charge-offs due to a $7.2 million charge-off on a single commercial real estate loan relationship. The allowance was $6.9 million, or 1.36% of total loans at December 31, 2010 and $7.6 million, or 1.60% of total loans at December 31, 2009. In 2010, total loans increased $32.5 million, with the increase primarily in residential real estate loans which contain less credit risk and market risk than both commercial real estate and commercial and industrial loans. |
● | Net interest and dividend income decreased $3.1 million to $29.4 million for the year ended December 31, 2010, compared to $32.5 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.64% for the year ended December 31, 2010, compared to 3.04% for the same period in 2009. The margin decreased because the yield on interest-earning assets decreased more than the cost of interest-bearing liabilities. The decrease in interest rates during 2010 caused an increase in prepayments on loans and investments and the funds were reinvested in a lower rate environment, thus reducing yields. |
● | Noninterest income increased $4.2 million to $7.4 million for the year ended December 31, 2010, compared to $3.2 million for the same period in 2009. The increase was primarily the result of an increase in net gains on the sale of securities of $4.5 million for the year ended December 31, 2010. |
● | Nonperforming loans decreased $2.3 million to $3.2 million at December 31, 2010, compared to $5.5 million at December 31, 2009. This represented 0.63% of total loans at December 31, 2010 and 1.15% of total loans at December 31, 2009. At December 31, 2010, nonperforming loans were primarily made up of three commercial relationships totaling $2.4 million. |
On a quarterly basis, Westfield Financial reviews investment securities with unrealized depreciation
56
Securities, including mortgage-backed securities, which management has the positive intent and ability to hold until maturity are classified as held to maturity and are carried at amortized cost. Securities, including mortgage-backed securities, that have been identified as assets for which there is not a positive intent to hold to maturity are classified as available for sale and are carried at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of equity. Accordingly, a misclassification would have a direct effect on stockholders’ equity. Sales or reclassification as available for sale (except for certain permitted reasons) of held to maturity securities may result in the reclassification of all such securities to available for sale. Westfield Financial has never sold held to maturity securities or reclassified such securities to available for sale other than in specifically permitt ed circumstances. Westfield Financial does not acquire securities or mortgage-backed securities for purposes of engaging in trading activities.
Westfield Financial’s general policyloans is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more, or earlier if the loan is considered impaired. Any unpaid amounts previously accrued on these loans are reversed from income. Subsequent cash receipts are applied to the outstanding principal balance or to interest income if, in the judgment of management, collection of principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and when subsequent performance reduces the concern as to the collectability of principal and interest. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans.
57
Westfield FinancialWe must make certain estimates in determining income tax expense for financial statement purposes. These estimates occur in the calculation of the deferred tax assets and liabilities, which arise from the temporary differences between the tax basis and financial statement basis of the Company’sour assets and liabilities. The carrying value of our net deferred tax asset is based on the Company’sour historic taxable income for the two prior years as well as our belief that it is more likely than not that the Companywe will generate sufficient future taxable income to realize these deferred tax assets. Judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws or other factors which could result in a change in the assessment of the realization of the net deferred tax asset.
58
| For the Years Ended December 31, | |||||||||||||||||||
| 2008 |
| 2007 |
| 2006 | |||||||||||||||
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average | |||
| (Dollars in thousands) | |||||||||||||||||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments(1) | $ 33,674 |
| $ 594 |
| 1.76 | % |
| $ 53,624 |
| $ 2,800 |
| 5.22 | % |
| $ 18,658 |
| $ 872 |
| 4.67 | % |
Securities(5) | 521,767 |
| 26,752 |
| 5.13 |
|
| 491,968 |
| 24,332 |
| 4.95 |
|
| 372,519 |
| 16,764 |
| 4.50 |
|
Loans(2)(5) | 444,492 |
| 27,280 |
| 6.14 |
|
| 398,281 |
| 26,993 |
| 6.78 |
|
| 386,039 |
| 25,586 |
| 6.63 |
|
Total interest-earning assets | 999,933 |
| 54,626 |
| 5.46 |
|
| 943,873 |
| 54,125 |
| 5.73 |
|
| 777,216 |
| 43,222 |
| 5.56 |
|
Total noninterest-earning assets | 68,831 |
|
|
|
|
|
| 65,194 |
|
|
|
|
|
| 50,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ 1,068,764 |
|
|
|
|
|
| $ 1,009,067 |
|
|
|
|
|
| $ 827,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts | $ 85,558 |
| 1,205 |
| 1.41 |
|
| $ 80,613 |
| 1,340 |
| 1.66 |
|
| $ 73,256 |
| 908 |
| 1.24 |
|
Savings accounts | 60,515 |
| 748 |
| 1.24 |
|
| 41,266 |
| 329 |
| 0.08 |
|
| 45,241 |
| 226 |
| 0.50 |
|
Money market deposit accounts | 67,017 |
| 763 |
| 1.14 |
|
| 85,045 |
| 1,301 |
| 1.53 |
|
| 109,710 |
| 1,684 |
| 1.53 |
|
Time certificates of deposit | 330,892 |
| 12,417 |
| 3.75 |
|
| 369,516 |
| 16,574 |
| 4.49 |
|
| 368,901 |
| 14,450 |
| 3.92 |
|
Total interest-bearing deposits | 543,982 |
| 15,133 |
|
|
|
| 576,440 |
| 19,544 |
|
|
|
| 597,108 |
| 17,268 |
|
|
|
Short-term borrowings and long-tern debt | 194,750 |
| 7,171 |
| 3.68 |
|
| 92,750 |
| 3,864 |
| 4.17 |
|
| 65,062 |
| 2,283 |
| 3.51 |
|
Interest-bearing liabilities | 738,732 |
| 22,304 |
| 3.02 |
|
| 669,190 |
| 23,408 |
| 3.50 |
|
| 662,170 |
| 19,551 |
| 2.95 |
|
Non-interest-bearing deposits | 45,009 |
|
|
|
|
|
| 39,387 |
|
|
|
|
|
| 41,134 |
|
|
|
|
|
Other noninterest-bearing liabilities | 9,828 |
|
|
|
|
|
| 10,495 |
|
|
|
|
|
| 7,927 |
|
|
|
|
|
Total noninterest-bearing liabilities | 54,837 |
|
|
|
|
|
| 49,882 |
|
|
|
|
|
| 49,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities | 793,569 |
|
|
|
|
|
| 719,072 |
|
|
|
|
|
| 711,231 |
|
|
|
|
|
Total equity | 275,195 |
|
|
|
|
|
| 289,995 |
|
|
|
|
|
| 116,520 |
|
|
|
|
|
Total liabilities and equity | $ 1,068,764 |
|
|
|
|
|
| $ 1,009,067 |
|
|
|
|
|
| $ 827,751 |
|
|
|
|
|
Less: Tax-equivalent adjustment(5) |
|
| (570) |
|
|
|
|
|
| (541) |
|
|
|
|
|
| (787) |
|
|
|
Net interest and dividend income |
|
| $ 31,752 |
|
|
|
|
|
| $ 30,176 |
|
|
|
|
|
| $ 22,884 |
|
|
|
Net interest rate spread(3) |
|
|
|
| 2.44 |
|
|
|
|
|
| 2.23 |
|
|
|
|
|
| 2.61 |
|
Net interest margin(4) |
|
|
|
| 3.23 | % |
|
|
|
|
| 3.25 | % |
|
|
|
|
| 3.05 | % |
Ratio of average interest-earning |
|
|
|
| 135.4 | x |
|
|
|
|
| 141.0 | x |
|
|
|
|
| 117.4 | x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Short-term investments include federal funds sold.
(2) Loans, including non-accrual loans, are net of deferred loan origination costs, and unadvanced funds.
(3) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(4) Net interest margin represents tax equivalent net interest and dividend income as a percentage of average interest earning assets.
(5) Investment securities, loan income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from taxequivalent net interest and dividend income to agree to the amount reported in the statements of income.
59
For the Years Ended December 31, | ||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Average Balance | Interest | Avg Yield/ Cost | Average Balance | Interest | Avg Yield/ Cost | Average Balance | Interest | Avg Yield/ Cost | ||||||||||||||||||||||
ASSETS: | ||||||||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||||||||
Loans(1)(2) | $ | 482,215 | $ | 24,887 | 5.16 | % | $ | 476,214 | $ | 25,834 | 5.42 | % | $ | 444,492 | $ | 27,280 | 6.14 | % | ||||||||||||
Securities(2) | 647,462 | 22,079 | 3.41 | 597,811 | 27,286 | 4.56 | 521,767 | 26,752 | 5.13 | |||||||||||||||||||||
Short-term investments(3) | 13,948 | 8 | 0.06 | 15,051 | 11 | 0.07 | 33,674 | 594 | 1.76 | |||||||||||||||||||||
Total interest-earning assets | 1,143,625 | 46,974 | 4.11 | 1,089,076 | 53,131 | 4.88 | 999,933 | 54,626 | 5.46 | |||||||||||||||||||||
Total noninterest-earning assets | 78,811 | 72,267 | 68,831 | |||||||||||||||||||||||||||
Total assets | $ | 1,222,436 | $ | 1,161,343 | $ | 1,068,764 | ||||||||||||||||||||||||
LIABILITIES AND EQUITY: | ||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||
NOW accounts | $ | 76,954 | 933 | 1.21 | $ | 68,967 | 1,238 | 1.80 | $ | 85,558 | 1,205 | 1.41 | ||||||||||||||||||
Savings accounts | 112,546 | 824 | 0.73 | 89,185 | 955 | 1.07 | 60,515 | 748 | 1.24 | |||||||||||||||||||||
Money market accounts | 56,082 | 358 | 0.64 | 53,100 | 467 | 0.88 | 67,017 | 763 | 1.14 | |||||||||||||||||||||
Time certificates of deposit | 347,590 | 7,735 | 2.23 | 337,692 | 10,034 | 2.97 | 330,892 | 12,417 | 3.75 | |||||||||||||||||||||
Total interest-bearing deposits | 593,172 | 9,850 | 548,944 | 12,694 | 543,982 | 15,133 | ||||||||||||||||||||||||
Short-term borrowings and long-term debt | 296,752 | 6,915 | 2.33 | 260,083 | 7,328 | 2.82 | 194,750 | 7,171 | 3.68 | |||||||||||||||||||||
Interest-bearing liabilities | 889,924 | 16,765 | 1.88 | 809,027 | 20,022 | 2.47 | 738,732 | 22,304 | 3.02 | |||||||||||||||||||||
Noninterest-bearing deposits | 83,077 | 80,186 | 45,009 | |||||||||||||||||||||||||||
Other noninterest-bearing liabilities | 9,513 | 14,789 | 9,828 | |||||||||||||||||||||||||||
Total noninterest-bearing liabilities | 92,590 | 94,975 | 54,837 | |||||||||||||||||||||||||||
Total liabilities | 982,514 | 904,002 | 793,569 | |||||||||||||||||||||||||||
Total equity | 239,922 | 257,341 | 275,195 | |||||||||||||||||||||||||||
Total liabilities and equity | $ | 1,222,436 | $ | 1,161,343 $ | $ | 1,068,764 | ||||||||||||||||||||||||
Less: Tax-equivalent adjustment(2) | (827 | ) | (601 | ) | (570 | ) | ||||||||||||||||||||||||
Net interest and dividend income | $ | 29,382 | $ | 32,508 | $ | 31,752 | ||||||||||||||||||||||||
Net interest rate spread(4) | 2.22 | % | 2.41 | % | 2.44 | % | ||||||||||||||||||||||||
Net interest margin(5) | 2.64 | % | 3.04 | % | 3.23 | % | ||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 128.5 | 134.6 | 135.4 | |||||||||||||||||||||||||||
____________________________________________ | ||
(1) | Loans, including non-accrual loans, are net of deferred loan origination costs, and unadvanced funds. | |
(2) | Securities income, loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported in the statements of income. | |
(3) | Short-term investments include federal funds sold. | |
(4) | Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. | |
(5) | Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning-assets. |
| Year Ended December 31, 2008 |
| Year Ended December 31, 2007 | ||||||||
| Increase/(Decrease) Due to |
|
|
| Increase/(Decrease) Due to |
|
| ||||
| Volume |
| Rate |
| Net |
| Volume |
| Rate |
| Net |
| (In thousands) | ||||||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
Short-term investments | $ (1,042) |
| $ (1,164) |
| $ (2,206) |
| $ 1,634 |
| $ 294 |
| $ 1,928 |
Investment securities(1) | 1,474 |
| 946 |
| 2,420 |
| 5,375 |
| 2,193 |
| 7,568 |
Loans(1) | 3,132 |
| (2,845) |
| 287 |
| 811 |
| 596 |
| 1,407 |
Total interest-earning assets | 3,564 |
| (3,063) |
| 501 |
| 7,820 |
| 3,083 |
| 10,903 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
NOW accounts | 82 |
| (217) |
| (135) |
| 91 |
| 341 |
| 432 |
Savings accounts | 153 |
| 266 |
| 419 |
| (20) |
| 123 |
| 103 |
Money market deposit accounts | (276) |
| (262) |
| (538) |
| (379) |
| (4) |
| (383) |
Time certificates of deposit | (1,732) |
| (2,425) |
| (4,157) |
| 24 |
| 2,100 |
| 2,124 |
Short-term borrowings and long- | 4,249 |
| (942) |
| 3,307 |
| 972 |
| 609 |
| 1,581 |
Total interest-bearing | 2,476 |
| (3,580) |
| (1,104) |
| 688 |
| 3,169 |
| 3,857 |
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest and | $ 1,088 |
| $ 517 |
| $ 1,605 |
| $ 7,132 |
| $ (86) |
| $ 7,046 |
_________________
(1) Securities and loan income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amount reported in the statements of income.
60
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009 | Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 | |||||||||||||||||||||||
Increase (Decrease) Due to | Increase (Decrease) Due to | |||||||||||||||||||||||
Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||
Interest-earning assets | (In thousands) | |||||||||||||||||||||||
Loans (1) | $ | 326 | $ | (1,273 | ) | $ | (947 | ) | $ | 1,947 | $ | (3,393 | ) | $ | (1,446 | ) | ||||||||
Securities (1) | 2,266 | (7,473 | ) | (5,207 | ) | 3,899 | (3,365 | ) | 534 | |||||||||||||||
Short-term investments | (1 | ) | (2 | ) | (3 | ) | (329 | ) | (254 | ) | (583 | ) | ||||||||||||
Total interest-earning assets | 2,591 | (8,748 | ) | (6,157 | ) | 5,517 | (7,012 | ) | (1,495 | ) | ||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
NOW accounts | 143 | (448 | ) | (305 | ) | (234 | ) | 267 | 33 | |||||||||||||||
Savings accounts | 250 | (381 | ) | (131 | ) | 354 | (147 | ) | 207 | |||||||||||||||
Money market accounts | 26 | (135 | ) | (109 | ) | (158 | ) | (138 | ) | (296 | ) | |||||||||||||
Time deposits | 294 | (2,593 | ) | (2,299 | ) | 255 | (2,638 | ) | (2,383 | ) | ||||||||||||||
Short-term borrowing and long-time debt | 1,033 | (1,446 | ) | (413 | ) | 2,406 | (2,249 | ) | 157 | |||||||||||||||
Total interest-bearing liabilities | 1,746 | (5,003 | ) | (3,257 | ) | 2,623 | (4,905 | ) | (2,282 | ) | ||||||||||||||
Change in net interest and dividend income | $ | 845 | $ | (3,745 | ) | $ | (2,900 | ) | $ | 2,894 | $ | (2,107 | ) | $ | 787 |
(1) | Securities and loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest income to agree to the amount reported in the statements of income. | |
2009
2010.
our held-to-maturity securities to the available-for-sale category. We determined that we no longer had the positive intent to hold our securities classified as held-to-maturity for an indefinite period of time because of our desire to have more flexibility in managing the investment portfolio. The securities transferred had a total amortized cost of $287.1 million, fair value of $299.7 million and a net unrealized gain of $12.6 million which was recorded as other comprehensive income at the time of transfer.
Residential real estate loans decreased $9.7 million to $98.4$135.3 million at December 31, 20082010 from $108.1$145.0 million at December 31, 2007. Since September 2001, Westfield Bank has referred substantially all2009. While we continue to originate commercial and industrial loans, new originations were offset by customers decreasing their balances on lines of the originations of its residentialcredit and normal loan payments and payoffs.
$129.7 million at December 31, 2009.
61
Total deposits
Money market accounts decreased $16.9 million to $57.7 million at December 31, 2008. These decreases were partially offset by increases of $21.0 million in regular savings and $6.9 million in checking accounts. The increases in both regular savings and checking accounts were fueled by new products with higher interest rates than the Bank’s other comparable products.
62
Stockholders’ equity decreased $26.6 million to $259.9 million at December 31, 2008 from $286.5 million at December 31, 2007.2009. This represented 23.4%17.8% of total assets as of December 31, 20082010 and 27.6%20.8% of total assets as of December 31, 2007.2009. The decrease in stockholders’shareholders’ equity is the result ofreflects the repurchase of 1,058,7781,988,634 shares of our common stock at a cost of $10.5$16.1 million, pursuant to Westfield Financial’sour current stock repurchaserepurchases plan, paying outthe payment of regular and special dividends amounting to $17.9$14.3 million, or $0.60$0.52 per share, and a decrease in accumulated other comprehensive income of $10.0$3.2 million. This was partially offset by an increase of $4.6 million related to the recognition of share-based compensation and the exercise of stock options and net income of $6.7$3.0 million for the year ended December 31, 2008 and the issuance of 433,110 shares of common stock amounting to $1.9 million in connection with stock option exercises. All of the stock options exercised during the year ended December 31, 2008 were granted in 2002.
2010.
2009
2009.
2009.
2009. The cost of interest-bearing liabilities decreased 59 basis points to 1.88% for the year ended December 31, 2010 from 2.47% for the same period in 2009.
Interest income2009. The tax-equivalent yield on securities decreased 115 basis points from loans increased $287,0004.56% for the year 2009 to $27.33.41% for the same period in 2010 due to the enduring low interest rate environment. The decrease in interest rates during 2010 caused an increase in prepayments on investments and the funds were reinvested in a lower rate environment, thus reducing yields. This was partially offset by a $49.7 million increase in the average balance of securities from $597.8 million for the year ended December 31, 2008 from $27.02009 to $647.5 million for the year ended December 31, 2007. The average balance of2010.
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2009. The tax-equivalent yield on loans decreased 26 basis points from 5.42% for the year 2009 to 5.16% for the same period in 2010 due to the enduring low interest rate environment. The decrease in interest rates during 2010 caused an increase in interest income resulting fromprepayments on loans and the volume of average loan balances of $3.1 millionfunds were reinvested in a lower rate environment, thus reducing yields. This was partially offset by a decrease$6.0 million increase in the yield onaverage balance of loans of $2.8from $476.2 million for the year ended December 31, 2008. The falling interest rate environment in 2008 caused a decrease in the average yield on loans of 64 basis points2009 to 6.14%$482.2 million for the year ended December 31, 2008 from 6.78% for the comparable 2007 period.
2010.
borrowings.
liabilities.
2009.
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For the year ended2010. Commercial and industrial loans decreased $9.7 million to $135.3 million compared to December 31, 2008, Westfield Bank recorded net charge-offs of $383,000 compared to net charge-offs of $111,000 for the year ended December 31, 2007. The 2008 period was comprised of charge-offs of $449,000 for the year ended December 31, 2008, partially offset by recoveries of $66,000 for the same period. The 2007 period was comprised of charge-offs of $317,000 for the year ended December 31, 2007, partially offset by recoveries of $206,000 for the same period.
Nonperforming loans increased $7.6 million to $8.8 million at December 31, 2008 from $1.2 million at December 31, 2007. This represented 1.83% of total loans at December 31, 2008 and 0.29% of total loans at December 31, 2007. The increase was primarily the result of a manufacturing commercial loan relationship of $5.5 million and an agricultural commercial loan relationship of $1.7 million.
The manufacturing commercial loan relationship is secured by real estate and other business assets. Additionally, all debt is cross-collateralized, defaulted, and guaranteed with the exception of the SBA guaranteed notes. During the twelve months ended December 31, 2008, a valuation allowance of $2.1 million was allocated on the relationship of $5.5 million based on the estimated fair value of the underlying collateral.
The agricultural commercial loan relationship is primarily secured by real estate. Management does not anticipate incurring significant losses on this relationship. During the twelve months ended December 31, 2008, a valuation allowance of $138,000 was allocated on the loan relationship of $1.7 million based on the estimated fair value of the underlying collateral.
Nonperforming residential real estate loans increased $149,000 to $1.1 million at December 31, 2008 from $995,000 at December 31, 2007. The majority of nonperforming residential real estate loans are collateralized by first liens.
Impaired loans increased $5.4 million to $5.6 million at December 31, 2008 primarily as a result of the two commercial loan relationships consisting of an agricultural commercial loan relationship of $1.7 million and a manufacturing commercial loan relationship of $5.5 million, as discussed above. The manufacturing commercial loan relationship is secured by real estate and other business assets. Additionally, all debt is cross-collateralized, defaulted, and guaranteed with the exception of the SBA guaranteed notes. Management estimates a $1.9 million loss on this relationship. During the twelve months ended December 31, 2008, a valuation allowance of $138,000 was allocated on the loan relationship of $1.7 million and a valuation allowance of $1.9 million was allocated on the loan relationship of $5.5 million based on the estimated fair value of the underlying collateral.
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2009.
The year ended December 31, 2008 included a net loss of $205,000 on the sale and write-down of securities. Westfield Financial recorded write-downs of $1.3 million on securities deemed to be other than temporarily impaired. This was primarily due to write-downs on preferred stock issued by Freddie Mac of $961,000. 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 December 31, 2008. The write-downs were partially offset by net gains of $1.1$4.1 million for the year ended December 31, 20082010, compared to a net loss of $383,000 for the same period in 2009. The increase in net gains on the salesales of other investment securities. securities for the year ended 2010 is primarily the result of management wanting to take advantage of unrealized gains within the portfolio as well as wanting to restructure the securities portfolio.
overdraft or insufficient customer accounts. Income from bank-owned life insurance increased $98,000the third-party mortgage program decreased $485,000 to $1.4 million$87,000 for the year ended December 31, 20082010, compared to the same period in 2007. This was primarily the result of a $2.8 million increase$572,000 in the average balancecomparable 2009 period. We have begun to buy back more residential loans from a third-party mortgage company as a means of bank-owneddiversifying our loan portfolio. As a result, we forgo receiving referral fee income on these loans but instead earn interest income for the life insuranceof the loans. In addition, net checking account processing fee income decreased $198,000 to $961,000 for the year ended December 31, 2010, primarily due to a decrease in 2008 compared to 2007.
overdraft fee income.
Data processing expense increased $270,000 to $1.7$52.5 million for the year ended December 31, 20082009, compared to $1.4$54.1 million for the same period in 2007. This2008.
Professional services expense4.88% for the twelve months ended December 31, 2009 from 5.46% for the same period in 2008. While the decrease in the average yield on the balance of interest-earning assets, on a tax-equivalent basis, decreased interest income by $7.0 million, the average balance of interest-earning assets increased $225,000$89.1 million, resulting in a partial offset of $5.5 million to $1.6the decrease in interest income for the year ended December 31, 2009.
Income Taxes.The provision for income taxes decreased $2.0 million to $1.82009 from $27.1 million for the year ended December 31, 2008. The tax-equivalent yield on loans decreased 72 basis points from 6.14% for the year 2008 to 5.42% for the same period in 2009 due to the falling interest rate environment. The decrease in interest income resulting from the decrease in the provision for income taxaverage yield on loans was primarily due to lower income before taxes. The effective tax rate was 21.2%partially offset by a $31.7 million increase in the average balance of loans from $444.5 million for the year ended December 31, 2008 and 30.5% for the same period in 2007.
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Comparison of Financial Condition at December 31, 2007 and December 31, 2006
Total assets increased $43.0 million to $1.0 billion at December 31, 2007 from $996.8 million at December 31, 2006. Cash and cash equivalents decreased $116.9 million, to $37.6 million at December 31, 2007 from $154.5 million at December 31, 2006. The decrease in cash and cash equivalents was the result of management investing the proceeds of Westfield Financial’s second step stock offering, which was completed on January 3, 2007, in investment securities and loans.
Securities and mortgage-backed securities increased $113.8 million to $522.8 million at December 31, 2007 from $409.0 million at December 31, 2006. Investment securities increased as management invested the proceeds of Westfield Financial’s second step stock offering, which was completed on January 3, 2007. The securities portfolio is primarily comprised of mortgage-backed securities, which totaled $380.8 million at December 31, 2007, the majority of which were issued by government-sponsored enterprises such as Fannie Mae. Privately issued mortgage-backed securities comprised 11.9% of the mortgage-backed securities portfolio at December 31, 2007, are rated AAA by Standard & Poors, and contain no sub-prime collateral.
Debt securities issued by government-sponsored enterprises increased by $20.4 million to $102.2 million at December 31, 2007 from $81.8 million at December 31, 2006. Securities issued by government-sponsored enterprises consist entirely of bonds issued by the Fannie Mae, Freddie Mac and the Federal Home Loan Bank of Boston. Westfield Financial also invests in municipal bonds issued by cities and towns in Massachusetts and are AAA rated by Moody’s, Standard & Poor’s, or Fitch, and the majority of which are also independently insured. Municipal bonds were $33.0 million at December 31, 2007 and $30.2 million at December 31, 2006. In addition, Westfield Financial has investments in Federal Home Loan Bank stock and mutual funds that invest only in securities allowed by the Office of Thrift Supervision.
Net loans increased by $29.7 million to $414.9 million at December 31, 2007 from $385.2 million at December 31, 2006. This was primarily the result of an increase in commercial and industrial loans and commercial real estate loans. Commercial and industrial loans increased $16.3 million to $116.5 million at December 31, 2007 from $100.2 million at December 31, 2006. Commercial real estate loans increased $15.4 million to $189.9 million at December 31, 2007 from $174.5 million at December 31, 2006. The increase in commercial and industrial loans and commercial real estate loans were due to increased loan originations.
Residential real estate loans decreased $1.4 million to $108.1 million at December 31, 2007 from $109.5 million at December 31, 2006. Since September 2001, Westfield Bank has referred substantially all of the originations of its residential real estate loans to a third party mortgage company. Residential real estate borrowers submit applications to Westfield Bank, but the loan is approved by and closed on the books of the mortgage company. The third party mortgage company owns the servicing rights and services the loans. Westfield Bank retains no residual ownership interest in these loans.
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Asset growth was funded primarily through a $68.4 million increase in Federal Home Loan Bank borrowings and debt, which totaled $123.4 million at December 31, 2007. Customer repurchase agreements decreased $1.1 million to $16.8 million at December 31, 2007 from $17.9 million at December 31, 2006. A customer repurchase agreement is an agreement by Westfield Bank to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the United States Government. This transaction settles immediately on a same day basis in immediately available funds. Interest paid is commensurate with other products of equal interest and credit risk. At December 31, 2007, all of Westfield Bank’s customer repurchase agreements were held by commercial customers.
Total deposits decreased $24.8 million to $602.7 million at December 31, 2007 from $627.5 million at December 31, 2006. The decrease in deposits was due to a decrease in time deposit and money market accounts, partially offset by an increase in regular savings and checking accounts. Time deposits decreased $20.7 million to $353.3 million at December 31, 2007. Management placed less emphasis on gathering time deposits in favor of using other types of funding, such as borrowings and debt.
Money market accounts decreased $19.8 million to $74.6 million at December 31, 2007. These decreases were partially offset by increases of $11.0 million in regular savings and $4.9 million in checking accounts. The increases in both regular savings and checking accounts were fueled by new products with higher interest rates than Westfield Bank’s other comparable products.
Stockholders’ equity decreased $2.9 million to $286.5 million at December 31, 2007 from $289.4 million at December 31, 2006. This represented 27.6% of total assets as of December 31, 2007 and 29.0% of total assets as of December 31, 2006. The change is primarily comprised of paying out regular and special dividends amounting to $0.40 per share in 2007 for a total of $12.1 million, partially offset by net income of $8.7$476.2 million for the year ended December 31, 2007.
Comparison2009.
General.Net incomeshort-term investments decreased for the year ended December 31, 2007 was $8.7 million, or $0.29 per diluted share, compared2009. The tax-equivalent yield on short-term investments decreased 169 basis points to $4.7 million, or $0.15 per diluted share0.07% for the year ended December 31, 2009 from 1.76% for the same period in 2006. The increase in earnings was primarily2008 due to the resultenduring low interest rate environment. In addition, the average balance of increase in net interest income, partially offset by increased noninterest expenses.
Interest and Dividend Income.Total interest and dividend income increased $11.2short-term investments decreased $18.6 million or 26.3%, to $53.6from $33.7 million for the year ended December 31, 2007, compared2008 to $42.4 million for the same period in 2006.
The increase in interest income was primarily the result of a $166.7 million increase in average earnings assets as a result of funds raised in Westfield Financial’s second step stock offering, which was completed on January 3, 2007. Average earning assets were $943.9$15.1 million for the year ended December 31, 2007 compared2009. Management actively reinvested available funds during the year into securities and loans in order to $777.2 million for the same period in 2006. The averageearn a more favorable yield on earning assets, on a tax equivalent basis, increased 17 basis points to 5.73% for the twelve months ended December 31, 2007 from 5.56% for the same periodour interest-earning assets.
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Interestinterest and dividends on securities was $23.9of $500,000 to $26.8 million for the year ended December 31, 2007 and $16.12009 compared to $26.3 million for the same period in 2006. The average balance on securities increased $119.5 million to $492.0 million at December 31, 2007 from $372.5 million at December 31, 2006. In addition, the tax equivalent yield on securities increased to 4.95% for the year 2007 from 4.50% for the year 2006.2008. The increase in interest and dividend income on securities was primarilydue to an increase in the result ofaverage balance on securities, which increased $76.0 million to $597.8 million at December 31, 2009 from $521.8 million at December 31, 2008. The increase was partially offset by a decrease in the reinvestment of the proceeds of Westfield Financial’s second step stock offering,tax-equivalent yield on securities, which was completed on January 3, 2007. In addition, as lower yielding investments purchased in a higher rate environment matured, were called or paid down in 2007, the funds were reinvested at higher rates.
Interest income from commercial and industrial loans and commercial real estate loans increased $1.2 milliondecreased 57 basis points to 4.56% for the year ended December 31, 20072009 from the year ended December 31, 2006. In accordance with Westfield Bank’s strategic plan, the average balance of commercial and industrial loans and commercial real estate loans increased $13.7 million to $282.9 million for the year ended December 31, 2007, compared to $269.2 million5.13% for the same period in 2006.
Interest income from residential real estate loans increased $250,0002008 due to $6.6 million for the year ended December 31, 2007 compared to $6.4 million for the same period in 2006. The average balance of residential real estate loans decreased $664,000 to $109.9 million for the year ended December 31, 2007 from $110.6 million for the year ended December 31, 2006. The average balance of home equity loans increased $6.4 million to $33.4 million but was offset by payments and payoffs in other areas.
enduring low interest rate environment.
Net Interest and Dividend Income.Net interest and dividend income increased $7.3 million to $30.2 million for the year ended December 31, 2007 as compared to $22.9 million for same period in 2006. The net interest margin, on a tax equivalent basis, was 3.25% and 3.05% for the years ended December 31, 2007 and 2006, respectively. The increase in net interest margin2009 was primarily the result of a decrease in interest expense of $2.3 million from the reinvestmentcomparable 2008 period resulting from a 55 basis point decrease in the average cost of interest-bearing liabilities, partially offset by an decrease in interest and dividend income of $1.6 million resulting from a 58 basis point decrease in the proceedsaverage yield of Westfield Financial’s second step stock offering, whichinterest-earning assets. The enduring low rate environment was completedthe cause for the basis point decrease in both the average cost of interest-bearing liabilities and the average yield on January 3, 2007.
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interest-earning assets.
2008. The allowance for loan losses was 1.60% of total loans at December 31, 2009 and 1.83% at December 31, 2008. At December 31, 2008, the allowance for loan losses included a specific valuation allowance of $2.1 million related to a manufacturing commercial loan relationship. This amount was charged off in the first quarter of 2009 and contributed to the decrease in the allowance for loan losses and the allowance for loan losses as a percent of total loans.
Nonperforming loans increased $174,000 to $1.2 million at
At December 31, 2007, commercial and industrial loans increased $16.3$8.8 million to $116.5$145.0 million compared to December 31, 2006. Westfield Bank considers2008. We consider these types of loans to contain more credit risk and market risk than both commercial real estate loans and conventional residential real estate mortgages. Commercial real estate loans increased by $15.4$5.2 million to $189.9$229.1 million at December 31, 2007.
2008.
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Incomeinterest rates. In addition, income from bank-owned life insurance increased $459,000$103,000 to $1.3$1.5 million for the year ended December 31, 20072009 compared to the same period in 2006.2008. This was primarily the result of a $11.2$2.6 million increase in the average balance of bank-owned life insurance in 20072009 compared to 2006.
2008.
Net checking account processing fee income decreased $301,000
Noninterest Expense.Noninterest expense for the year ended December 31, 2007 was $21.8 million compared to $19.4 million for the same period in 2006. This2008. The increase was primarily due to an increasehigher FDIC insurance assessments nationwide and a special assessment of $1.8 million in salaries$453,000 at June 30, 2009. Salaries and benefits increased $295,000 to $13.7$15.0 million for the year ended December 31, 2007. Salaries expense increased $1.2 million as a2009, primarily the result of hiring new employees and normal increasesa $526,000 increase in costs related to the employee salaries. A portion of the new hiringdefined benefit pension plan. This was partially offset by a $207,000 decrease in salary expenses associated with a new Westfield Bank branch which openedemployee bonuses.
Professional services expense increased $319,000 to $1.4$1.3 million for the year ended December 31, 20072009, compared to $1.1$1.8 million for the same period in 2006. This was primarily the result of expenses related to corporate legal matters and fees paid to an industry consultant.
Income Taxes.Income taxes increased $2.3 million to $3.8 million primarily as a result of an increase in income before income taxes.comparable 2008 period. The effective tax rate was 30.5%18.8% for the year ended December 31, 20072009 and 24.7%21.2% for the same period in 2006.2008. The increasedecrease in the tax provision and effective tax rate in the 2009 period is due primarily to a reduction in tax advantagedlower pre-tax income while maintaining the same level of tax-advantaged income such as a percentageBOLI and tax-exempt municipal obligations. The 2008 period also includes the utilization of income before income taxes.
prior years’ loss carry forwards against gains on the sales of securities.
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Westfield Bank
| Within |
| After 1 Year |
| After 3 Years |
| After |
| Total |
| (In thousands) | ||||||||
Lease Obligations |
|
|
|
|
|
|
|
|
|
Operating lease obligations | $ 524 |
| $ 1,014 |
| $ 809 |
| $ 10,667 |
| $ 13,014 |
|
|
|
|
|
|
|
|
|
|
Borrowings and Debt |
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank | 73,550 |
| 45,000 |
| 20,000 |
| 5,000 |
| 143,550 |
Securities sold under agreements | - |
| - |
| - |
| 58,300 |
| 58,300 |
Total borrowings and debt | 73,550 |
| 45,000 |
| 20,000 |
| 63,300 |
| 201,850 |
|
|
|
|
|
|
|
|
|
|
Credit Commitments |
|
|
|
|
|
|
|
|
|
Available lines of credit | 54,319 |
| - |
| - |
| 14,903 |
| 69,222 |
Other loan commitments | 17,905 |
| - |
| - |
| - |
| 17,905 |
Letters of credit | 5,703 |
| - |
| - |
| 243 |
| 5,946 |
Total credit commitments | 77,927 |
| - |
| - |
| 15,146 |
| 93,073 |
|
|
|
|
|
|
|
|
|
|
Total | $ 152,001 |
| $ 46,014 |
| $ 20,809 |
| $ 89,113 |
| $ 307,937 |
|
|
|
|
|
|
|
|
|
|
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Within 1 Year | After 1 Year But Within 3 Years | After 3 Year But Within 5 Years | After 5 Years | Total | ||||||||||||||||
Lease Obligations | ||||||||||||||||||||
Operating lease obligations | $ | 565 | $ | 939 | $ | 898 | $ | 10,137 | $ | 12,539 | ||||||||||
Borrowings and Debt | ||||||||||||||||||||
Federal Home Loan Bank | 55,751 | 66,254 | 66,224 | 14,000 | 202,229 | |||||||||||||||
Securities sold under agreements to repurchase | 17,559 | 14,800 | 28,000 | 38,500 | 98,859 | |||||||||||||||
Total borrowings and debt | 73,310 | 81,054 | 94,224 | 52,500 | 301,088 | |||||||||||||||
Credit Commitments | ||||||||||||||||||||
Available lines of credit | 60,305 | - | - | 20,073 | 80,378 | |||||||||||||||
Other loan commitments | 6,804 | - | 50 | - | 6,854 | |||||||||||||||
Letters of credit | 2,527 | - | - | 505 | 3,032 | |||||||||||||||
Total credit commitments | 69,636 | - | 50 | 20,578 | 90,264 | |||||||||||||||
Total | $ | 143,511 | $ | 81,993 | $ | 95,172 | $ | 83,215 | $ | 403,891 |
Westfield Financial’s
Westfield Financial does The Bank had tier 1 leverage capital of $214.7 million, or 17.4% to adjusted total assets, tier 1 capital to risk weighted assets of $214.7 million or 31.7%, and total capital to risk weighted assets of $221.6 million or 32.7%. See Footnote 10, Regulatory Capital, of our notes to consolidated financial statements for further information on our regulatory requirements.
Westfield Financial does
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In recent years, Westfield Bank’s lending activities have emphasized commercial real estate and commercial and industrial loans.Commercial real estate loans have grown $33.9 million or 17.8% since December 31, 2007. Commercial and industrial loans have grown $37.3 million or 32.1% since December 31, 2007. Management believes that Westfield Bank’s increased emphasis on commercial lending has allowed it to diversify its loan portfolio while continuing to meet the needs of the businesses and individuals that it serves.
Westfield Bank’s
•
maintaining the diversity of Westfield Bank’s existing loan portfolio through the origination of commercial loans and commercial real estate loans which typically have variable rates and shorter terms than residential mortgages; and
•
emphasizing investments with an expected average duration of five years or less.
● | maintaining the diversity of our existing loan portfolio through the origination of commercial loans and commercial real estate loans which typically have variable rates and shorter terms than residential mortgages; and |
● | emphasizing investments with an expected average duration of five years or less. |
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For the Year Ending December 31, 2009 | ||||
(Dollars in thousands) | ||||
Changes in |
| Net Interest and |
| % Change |
300 |
| 35,127 |
| 3.5% |
200 |
| 34,613 |
| 2.0% |
100 |
| 34,058 |
| 0.4% |
0 |
| 33,925 |
| 0.0% |
-100 |
| 33,669 |
| -0.8% |
-200 |
| 33,217 |
| -2.1% |
-300 |
| 32,868 |
| -3.1% |
For the Year Ending December 31, 2011 | ||||||||
Changes in Interest Rates (Basis Points) | Net Interest and Dividend Income | % Change | ||||||
(Dollars in thousands) | ||||||||
400 | 33,600 | 4.5 | % | |||||
300 | 33,369 | 3.8 | % | |||||
200 | 33,087 | 2.9 | % | |||||
100 | 32,896 | 2.3 | % | |||||
0 | 32,143 | 0.0 | % | |||||
-100 | 31,838 | -0.9 | % | |||||
-200 | 29,567 | -8.0 | % |
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In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. This Statement clarifies that the exchange price is the price in an orderly transaction between market participants
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In October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 was effective immediately upon issuance, and includes prior periods for which financial statements have not been issued. This Statement did not have a material impact on the consolidated financial statements at December 31, 2008.
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” This Statement permits entities to choose to measure many financial instruments and certain other items at fair value, which the objective of improving financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions, and is expected to expand the use of fair value measurement. An entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may generally be applied instrument by instrument and is irrevocable. This Statement was adopted by Westfield Financial on January 1, 200 8 and did not have a material impact on the consolidated financial statements.
In June 2007, the FASB ratified EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards,” which requires an entity to recognize, as an increase to additional paid-in capital, the income taxes benefits related to dividends that are charged to retained earnings for unvested equity shares or options. This EITF was adopted on January 1, 2008 and did not have a material impact on the consolidated financial statements of Westfield Financial.
In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“Statement No. 141(R)”). Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree. Statement No. 141(R) further addresses how goodwill acquired or a gain from a bargain purchase is to be recognized and measured and determines what disclosures are needed to enable users of the financial statements to evaluate the effects of the business combination. Statement No. 141(R) is effective prospectively for business combinations for which the acquisition date is on or after December 15, 2008. Earlier application is not permitted.
In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements an amendmentfor a summary of ARB No. 51.” This Statement establishesthe recent accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.
pronouncements.
In March of 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.” This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses
77
derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.
In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This staff position requires disclosure of information about how investment allocation decisions are made, the fair value of each major category of plan assets and the inputs and valuation techniques used to develop fair value measurements. Also, an employer shall provide users of financial statements with an understanding of significant concentrations of risk in plan assets. In addition, it requires a nonpublic entity that sponsors one or more defined benefit pension or postretireme nt plans to disclose the net periodic benefit cost recognized for each annual period for which an annual statement of income is presented. The disclosures about plan assets are required for fiscal years ending after December 15, 2009 and are not expected to have a material impact on the consolidated financial statements of Westfield Financial. The requirement to disclose the net periodic benefit cost is effective as of December 31, 2008. This disclosure has been provided in these consolidated financial statements and did not have a material impact on the consolidated financial statements as of December 31, 2008. Upon initial adoption of FSP 132(R)-1, disclosures are not required for earlier periods that are presented for comparative purposes.
In January 2009, the FASB issued FASB Staff Position No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP 99-20-1”). FSP 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance. FSP 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008. This Statement did not have a material impact o n the consolidated financial statements of Westfield Financial at December 31, 2008.
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The
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None. |
CONTROLS AND PROCEDURES |
79
•
The management of Westfield Financial is responsible for establishing and maintaining adequate internal control over financial reporting. Westfield Financial’s internal control system is a process designed to provide reasonable assurance to Westfield Financial’s management and board of directors regarding the preparation and fair presentation of published financial statements.
● | Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. |
•
● | Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
● | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
● | Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2010, our internal control over financial reporting is effective based on those criteria. |
None. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
PRINCIPAL ACCOUNTING FEES AND SERVICES |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a)(1) | Financial Statements Reference is made to the Consolidated Financial Statements included in Item 8 of Part II hereof. |
(a)(2) | Financial Statement Schedules Consolidated financial statement schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedules, or because the required information is provided in the consolidated financial statements or notes thereto. |
(a)(3) | Exhibits The exhibits required to be filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index attached hereto and are incorporated herein by reference. |
Westfield Financial, Inc. | ||
By: | /s/ James C. Hagan | |
James C. Hagan | ||
Chief Executive Officer and President | ||
(Principal Executive Officer) | ||
By: | /s/ Leo R. Sagan, Jr. | |
Leo R. Sagan, Jr. | ||
Chief Financial Officer and Treasurer | ||
(Principal Financial Officer and Principal Accounting Officer) |
Name | Title | Date | ||
/s/ James C. Hagan | Chief Executive Officer, President and Director | March 11, 2011 | ||
James C. Hagan | (Principal Executive Officer) | |||
/s/ Donald A. Williams | Chairman of the Board | March 11, 2011 | ||
Donald A. Williams | ||||
/s/ Victor J. Carra | Director | March 11, 2011 | ||
Victor J. Carra | ||||
/s/ David C. Colton, Jr. | Director | March 11, 2011 | ||
David C. Colton, Jr. | ||||
/s/ Robert T. Crowley, Jr. | Director | March 11, 2011 | ||
Robert T. Crowley, Jr. | ||||
/s/ Harry C. Lane | Director | March 11, 2011 | ||
Harry C. Lane | ||||
/s/ Richard C. Placek | Director | March 11, 2011 | ||
Richard C. Placek | ||||
/s/ Paul R. Pohl | Director | March 11, 2011 | ||
Paul R. Pohl | ||||
/s/ Philip R. Smith | Director | March 11, 2011 | ||
Philip R. Smith | ||||
/s/ Charles E. Sullivan | Director | March 11, 2011 | ||
Charles E. Sullivan | ||||
2.1 | Amended and Restated Plan of Conversion and Stock Issuance of Westfield Mutual Holding Company, Westfield Financial, Inc. and Westfield Bank (incorporated by reference to Exhibit 2.1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006). | |
3.1 | Articles of Organization of Westfield Financial, Inc. (incorporated by reference to Exhibit 3.3 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2007). | |
3.2† | Amended and Restated Bylaws of Westfield Financial, Inc. | |
4.1 | Form of Stock Certificate of Westfield Financial, Inc. (incorporated by reference to Exhibit 4.1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006). | |
10.1* | Form of Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.1 of the Registration Statement No. 333-68550 on Form S-1 filed with the Securities and Exchange Commission on August 28, 2001). | |
10.2* | Amendment to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.9 of the Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission on March 31, 2003). | |
10.3* | Amendment No. 1 to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.9 of the Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004). | |
10.4* | Amendment No. 3 (incorporating Amendment Nos. 1 and 2) to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.10 of the Form 8-K filed with the Securities and Exchange Commission on August 25, 2005). | |
10.5* | Amendment No. 4 to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.3 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2010). | |
10.6† | Amendment No. 5 to the Employee Stock Ownership Plan of Westfield Financial, Inc. | |
10.7* | Form of Director’s Deferred Compensation Plan (incorporated by reference to Exhibit 10.7 of the Form 8-K filed with the Securities and Exchange Commission on December 22, 2005). | |
10.8* | The 401(k) Plan adopted by Westfield Bank (incorporated herein by reference to Exhibit 4.1 of the Post-Effective Amendment No. 1 to the Registration Statement No. 333-73132 on Form S-8 filed with the Securities and Exchange Commission on April 28, 2006). | |
10.9* | Amendment to the 401(k) Plan adopted by Westfield Bank (incorporated by reference to Exhibit 10.11 of the Form 8-K filed with the Securities and Exchange Commission on July 13, 2006). | |
10.10 | * | Amended and Restated Benefit Restoration Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on October 25, 2007). |
10.11 | * | Form of Amended and Restated Deferred Compensation Agreement with Donald A. Williams (incorporated by reference to Exhibit 10.10 of the Form 8-K filed with the Securities and Exchange Commission on December 22, 2005). |
10.12 | * | Amended and Restated Employment Agreement between James C. Hagan and Westfield Bank (incorporated by reference to Exhibit 10.9 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.13 | * | Amended and Restated Employment Agreement between James C. Hagan and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.12 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.14 | * | Agreement between Westfield Bank and Village Mortgage Company (incorporated by reference to Exhibit 10.17 of Amendment No. 1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006). |
10.15 | * | Employment Agreement between Leo R. Sagan, Jr. and Westfield Bank (incorporated by reference to Exhibit 10.15 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.16 | * | Employment Agreement between Leo R. Sagan, Jr. and Westfield Financial, Inc (incorporated by reference to Exhibit 10.16 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.17 | * | Employment Agreement between Gerald P. Ciejka and Westfield Bank (incorporated by reference to Exhibit 10.17 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.18 | * | Employment Agreement between Gerald P. Ciejka and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.18 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.19 | * | Employment Agreement between Allen J. Miles, III and Westfield Bank (incorporated by reference to Exhibit 10.19 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.20 | * | Employment Agreement between Allen J. Miles, III and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.20 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009). |
10.21 | * | 2002 Stock Option Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on May 24, 2002). |
10.22 | * | Amendment to the 2002 Stock Option Plan (incorporated by reference to Appendix A of the Schedule 14A filed with the Securities and Exchange Commission on April 25, 2003). |
10.23 | * | 2002 Recognition and Retention Plan (incorporated by reference to Appendix C of the Schedule 14A filed with the Securities and Exchange Commission on May 24, 2002). |
10.24 | * | Amendment to the 2002 Recognition and Retention Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on April 25, 2003). |
10.25 | * | 2007 Stock Option Plan (incorporated by reference to Appendix A of the Schedule 14A filed with the Securities and Exchange Commission on June 18, 2007). |
10.26 | * | Amendment to the 2007 Stock Option Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on April 14, 2008). |
10.27 | * | 2007 Recognition and Retention Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on June 18, 2007). |
10.28 | * | Amendment to the 2007 Recognition and Retention Plan (incorporated by reference to Appendix C of the Schedule 14A filed with the Securities and Exchange Commission on April 14, 2008). |
21.1† | Subsidiaries of Westfield Financial | |
23.1† | Consent of Wolf & Company, P.C. | |
31.1† | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2† | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1† | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2† | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
•
•
Westfield Financial, Inc.’s management assessed the effectiveness of Westfield Financial’s internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2008, Westfield Financial’s internal control over financial reporting is effective based on those criteria.
•
Westfield Financial Inc.’s Independent Registered Public Accounting Firm has issued an audit report on the effective operation of Westfield Financial’s internal control over financial reporting as of December 31, 2008. This report appears on pages F-45 and F-46.
ITEM 9B.
OTHER INFORMATION
None.
80
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following information included in the Proxy Statement is incorporated herein by reference: “Information About Our Board of Directors,” “Information About Our Executive Officers,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance.”
ITEM 11.
EXECUTIVE COMPENSATION
The following information included in the Proxy Statement is incorporated herein by reference: “Transactions with Related Persons – Compensation Committee Interlocks,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Executive and Director Compensation Tables.”
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following information included in the Proxy Statement is incorporated herein by reference: “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The following information included in the Proxy Statement is incorporated herein by reference: “Transactions with Certain Related Persons” and “Board of Directors Independence.”
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The following information included in the Proxy Statement is incorporated herein by reference: “Independent Registered Public Accounting Firm Fees and Services.”
81
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a.
Financial Statements
Reference is made to the Consolidated Financial Statements included in Item 8 of Part II hereof.
b.
Exhibits
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*
Filed herewith.
(1)
Incorporated by reference to the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006, as amended.
(2)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on January 5, 2007.
(3)
Incorporated herein by reference to the Registration Statement No. 333-68550 on Form S-1 filed with the Securities and Exchange Commission on August 28, 2001, as amended.
(4)
Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission on March 31, 2003.
(5)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on December 22, 2005.
(6)
Incorporated herein by reference to the Post-Effective Amendment No. 1 to the Registration Statement No. 333-73132 on Form S-8 filed with the Securities and Exchange Commission on April 28, 2006.
(7)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on October 29, 2007.
(8)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009.
83
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 13, 2009.
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Pursuant to the requirements of the Securities Act of 1933, as amended, and any rules and regulations promulgated thereunder, this Annual Report on Form 10-K, has been signed by the following persons in the capacities and on the dates indicated.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Westfield Financial, Inc.
We have audited the accompanying consolidated balance sheets of Westfield Financial, Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
We also have audited, Also in accordance with the standards of the Public Accounting Oversight Board (United States),our opinion, Westfield Financial, Inc. and subsidiaries’maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008,2010, based on criteria established inInternal Control—Integrated Framework
(COSO).
F-1
WESTFIELD FINANCIAL INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
| December 31, | ||
| 2008 |
| 2007 |
ASSETS |
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Cash and due from banks | $ 11,525 |
| $ 16,603 |
Federal funds sold | 42,338 |
| 21,017 |
Interest-bearing deposits and other short-term Investments | 2,670 |
| 3 |
Cash and cash equivalents | 56,533 |
| 37,623 |
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SECURITIES : |
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Available for sale - at estimated fair value | 24,396 |
| 38,051 |
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Held to maturity - at amortized cost (estimated fair value of | 79,303 |
| 104,025 |
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MORTGAGE-BACKED SECURITIES: |
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Available for sale - at estimated fair value | 233,747 |
| 206,178 |
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Held to maturity - at amortized cost (estimated fair value of $168,716 at | 168,332 |
| 174,594 |
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FEDERAL HOME LOAN BANK OF BOSTON AND OTHER | 8,456 |
| 7,510 |
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LOANS - Net of allowance for loan losses of $8,796 at December 31, 2008 | 472,135 |
| 414,902 |
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PREMISES AND EQUIPMENT, Net | 12,066 |
| 12,712 |
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ACCRUED INTEREST RECEIVABLE | 5,261 |
| 5,761 |
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BANK-OWNED LIFE INSURANCE | 36,100 |
| 32,398 |
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DEFERRED TAX ASSET, Net | 10,521 |
| 3,776 |
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OTHER ASSETS | 2,206 |
| 2,254 |
TOTAL ASSETS | $ 1,109,056 |
| $ 1,039,784 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES: |
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DEPOSITS |
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Noninterest-bearing | $ 50,860 |
| $ 42,408 |
Interest-bearing | 537,169 |
| 560,268 |
Total deposits | 588,029 |
| 602,676 |
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SHORT-TERM BORROWINGS | 49,824 |
| 35,268 |
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LONG-TERM DEBT | 173,300 |
| 105,000 |
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DUE TO BROKER | 27,603 |
| 2,258 |
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OTHER LIABILITIES | 10,381 |
| 8,050 |
TOTAL LIABILITIES | 849,137 |
| 753,252 |
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COMMITMENTS AND CONTINGENCIES (NOTE 14) |
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STOCKHOLDERS' EQUITY: |
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Preferred stock - $.01 par value, 5,000,000 shares authorized, | - |
| - |
None outstanding at December 31, 2008 and December 31, 2007 |
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Common stock - $.01 par value, 75,000,000 shares authorized, | 313 |
| 319 |
Additional paid-in capital | 204,866 |
| 209,497 |
Unearned compensation - ESOP | (10,913) |
| (11,542) |
Unearned compensation - Equity Incentive Plan | (4,337) |
| (5,493) |
Retained earnings | 78,898 |
| 92,702 |
Accumulated other comprehensive (loss) income | (8,908) |
| 1,049 |
Total stockholders' equity | 259,919 |
| 286,532 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,109,056 |
| $ 1,039,784 |
See accompanying notes to consolidated financial statements.
11, 2011
WESTFIELD FINANCIAL, INC., AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Dollars in thousands, except share data) | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 9,247 | $ | 12,204 | ||||
Federal funds sold | 13 | 2 | ||||||
Interest-bearing deposits and other short-term investments | 2,351 | 16,513 | ||||||
Cash and cash equivalents | 11,611 | 28,719 | ||||||
SECURITIES : | ||||||||
Available for sale - at fair value | 644,139 | 319,121 | ||||||
Held to maturity - at amortized cost (fair value of $303,619) | - | 295,011 | ||||||
FEDERAL HOME LOAN BANK OF BOSTON AND OTHER RESTRICTED STOCK - AT COST | 12,251 | 10,339 | ||||||
LOANS - Net of allowance for loan losses of $6,934 at December 31, 2010 and $7,645 at December 31, 2009 | 502,392 | 469,149 | ||||||
PREMISES AND EQUIPMENT, Net | 11,603 | 12,202 | ||||||
ACCRUED INTEREST RECEIVABLE | 4,279 | 5,198 | ||||||
BANK-OWNED LIFE INSURANCE | 40,494 | 38,970 | ||||||
DEFERRED TAX ASSET, Net | 8,811 | 6,995 | ||||||
OTHER REAL ESTATE OWNED | 223 | 1,662 | ||||||
OTHER ASSETS | 3,686 | 4,044 | ||||||
TOTAL ASSETS | $ | 1,239,489 | $ | 1,191,410 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
LIABILITIES: | ||||||||
DEPOSITS : | ||||||||
Noninterest-bearing | $ | 85,217 | $ | 80,110 | ||||
Interest-bearing | 615,118 | 567,865 | ||||||
Total deposits | 700,335 | 647,975 | ||||||
SHORT-TERM BORROWINGS | 62,937 | 74,499 | ||||||
LONG-TERM DEBT | 238,151 | 213,845 | ||||||
SECURITIES PENDING SETTLEMENT | 7,791 | - | ||||||
OTHER LIABILITIES | 9,030 | 7,792 | ||||||
TOTAL LIABILITIES | 1,018,244 | 944,111 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 13) | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Preferred stock - $.01 par value, 5,000,000 shares authorized, none outstanding at December 31, 2010 and December 31, 2009 | - | - | ||||||
Common stock - $.01 par value, 75,000,000 shares authorized, 28,166,419 shares issued and outstanding at December 31, 2010; 29,818,526 shares issued and outstanding at December 31, 2009 | 282 | 298 | ||||||
Additional paid-in capital | 181,842 | 193,609 | ||||||
Unearned compensation - ESOP | (9,701 | ) | (10,299 | ) | ||||
Unearned compensation - Equity Incentive Plan | (2,158 | ) | (3,248 | ) | ||||
Retained earnings | 56,496 | 69,253 | ||||||
Accumulated other comprehensive loss | (5,516 | ) | (2,314 | ) | ||||
Total shareholders' equity | 221,245 | 247,299 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,239,489 | $ | 1,191,410 | ||||
See accompanying notes to consolidated financial statements. |
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(Dollars in thousands, except share data) | ||||||||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
INTEREST AND DIVIDEND INCOME: | ||||||||||||
Debt securities, taxable | $ | 19,648 | $ | 25,090 | $ | 24,362 | ||||||
Residential and commercial real estate loans | 18,023 | 18,312 | 18,783 | |||||||||
Commercial and industrial loans | 6,496 | 7,150 | 8,032 | |||||||||
Debt securities, tax-exempt | 1,533 | 1,470 | 1,389 | |||||||||
Consumer loans | 213 | 263 | 322 | |||||||||
Equity securities | 226 | 234 | 574 | |||||||||
Federal funds sold, interest-bearing deposits and other short-term investments | 8 | 11 | 594 | |||||||||
Total interest and dividend income | 46,147 | 52,530 | 54,056 | |||||||||
INTEREST EXPENSE: | ||||||||||||
Deposits | 9,850 | 12,694 | 15,133 | |||||||||
Long-term debt | 6,538 | 6,984 | 6,291 | |||||||||
Short-term borrowings | 377 | 344 | 880 | |||||||||
Total interest expense | 16,765 | 20,022 | 22,304 | |||||||||
Net interest and dividend income | 29,382 | 32,508 | 31,752 | |||||||||
PROVISION FOR LOAN LOSSES | 8,923 | 3,900 | 3,453 | |||||||||
Net interest and dividend income after provision for loan losses | 20,459 | 28,608 | 28,299 | |||||||||
NONINTEREST INCOME (LOSS): | ||||||||||||
Total other-than-temporary impairment losses on equity securities | - | - | (1,283 | ) | ||||||||
Total other-than-temporary impairment losses on debt securities | (590 | ) | (1,754 | ) | - | |||||||
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss on debt securities | 443 | 1,476 | - | |||||||||
Net other-than-temporary impairment losses recognized in income | (147 | ) | (278 | ) | (1,283 | ) | ||||||
Service charges and fees | 1,940 | 2,616 | 2,368 | |||||||||
Income from bank-owned life insurance | 1,524 | 1,523 | 1,416 | |||||||||
Loss on sales of premises and equipment, net | - | (8 | ) | - | ||||||||
Loss on prepayment of borrowings | - | (142 | ) | - | ||||||||
Gain (loss) on sales of securities, net | 4,072 | (383 | ) | 1,078 | ||||||||
Gain (loss) on disposal of OREO | 1 | (110 | ) | - | ||||||||
Total noninterest income | 7,390 | 3,218 | 3,579 | |||||||||
NONINTEREST EXPENSE: | ||||||||||||
Salaries and employees benefits | 14,712 | 15,018 | 14,719 | |||||||||
Occupancy | 2,620 | 2,583 | 2,448 | |||||||||
Computer operations | 1,940 | 1,760 | 1,717 | |||||||||
Professional fees | 1,671 | 1,705 | 1,625 | |||||||||
OREO expense | 374 | 47 | - | |||||||||
FDIC insurance assessment | 751 | 1,134 | 89 | |||||||||
Other | 2,741 | 2,853 | 2,794 | |||||||||
Total noninterest expense | 24,809 | 25,100 | 23,392 | |||||||||
INCOME BEFORE INCOME TAXES | 3,040 | 6,726 | 8,486 | |||||||||
INCOME TAX PROVISION | 34 | 1,267 | 1,795 | |||||||||
NET INCOME | $ | 3,006 | $ | 5,459 | $ | 6,691 | ||||||
EARNINGS PER COMMON SHARE: | ||||||||||||
Basic earnings per share | $ | 0.11 | $ | 0.19 | $ | 0.22 | ||||||
Weighted average shares outstanding | 27,595,014 | 29,308,996 | 29,838,347 | |||||||||
Diluted earnings per share | $ | 0.11 | $ | 0.18 | $ | 0.22 | ||||||
Weighted average diluted shares outstanding | 27,793,409 | 29,577,622 | 30,190,532 | |||||||||
See accompanying notes to consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |
(Dollars in thousands, except share data) |
Common Stock | Unearned | Accumulated | ||||||||||||||||||||||||||||||
Shares | Par Value | Additional Paid-in Capital | Unearned Compensation- ESOP | Compensation- Equity Incentive Plan | Retained Earnings | Other Comprehensive Loss | Total | |||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2007 | 31,933,549 | $ | 319 | $ | 209,497 | $ | (11,542 | ) | $ | (5,493 | ) | $ | 92,702 | $ | 1,049 | $ | 286,532 | |||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | 6,691 | - | 6.691 | ||||||||||||||||||||||||
Net unrealized losses on securities available for sale arising during the period net of reclassification adjustment and tax effects | - | - | - | - | - | - | (7,376 | ) | (7,376 | ) | ||||||||||||||||||||||
Change in pension gains or losses and transition assets, net of tax | - | - | - | - | - | - | (2,581 | ) | (2,581 | ) | ||||||||||||||||||||||
Total comprehensive loss | - | - | (3,266 | ) | ||||||||||||||||||||||||||||
Common stock held by ESOP committed to be released (93,947 shares) | - | - | 291 | 629 | - | - | - | 920 | ||||||||||||||||||||||||
Share-based compensation – stock options | - | - | 770 | - | - | - | - | 770 | ||||||||||||||||||||||||
Share-based compensation – equity incentive plan | - | - | - | - | 1,156 | - | - | 1,156 | ||||||||||||||||||||||||
Excess tax shortfalls from equity incentive plan | - | - | (11 | ) | - | - | - | - | (11 | ) | ||||||||||||||||||||||
Common stock repurchased | (1,058,778 | ) | (10 | ) | (10,473 | ) | - | - | - | - | (10,483 | ) | ||||||||||||||||||||
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.$60 per share) | - | - | - | - | - | (17,945 | ) | - | (17,945 | ) | ||||||||||||||||||||||
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 | - | - | - | - | - | 5,459 | - | 5,459 | ||||||||||||||||||||||||
Noncredit portion of other-than-temporary impairment losses on | ||||||||||||||||||||||||||||||||
available for sale securities net of reclassification and tax effects | - | - | - | - | - | - | (872 | ) | (872 | ) | ||||||||||||||||||||||
Net unrealized gains on securities available for sale arising during the period, net of reclassification adjustment and tax effects | 6,791 | 6,791 | ||||||||||||||||||||||||||||||
Change in pension gains or losses and transition assets, net of tax | - | - | - | - | - | 675 | 675 | |||||||||||||||||||||||||
Total comprehensive income | 12,053 | |||||||||||||||||||||||||||||||
Common stock held by ESOP committed to be released (91,493 shares) | - | - | 210 | 614 | - | - | - | 824 | ||||||||||||||||||||||||
Share-based compensation - stock options | - | - | 899 | - | - | - | - | 899 | ||||||||||||||||||||||||
Share-based compensation - equity incentive plan | - | - | - | - | 1,285 | - | - | 1,285 | ||||||||||||||||||||||||
Excess tax benefit from equity incentive plan | - | - | 5 | - | - | - | - | 5 | ||||||||||||||||||||||||
Common stock repurchased | (1,591,733 | ) | (16 | ) | (13,674 | ) | - | - | - | - | (13,690 | ) | ||||||||||||||||||||
Issuance of common stock in connection with stock option exercises | 102,378 | 1 | 957 | - | - | (509 | ) | - | 449 | |||||||||||||||||||||||
Issuance of common stock in connection with equity incentive plan | - | - | 205 | - | (205 | ) | - | - | - | |||||||||||||||||||||||
Forfeiture of common stock in connection with equity incentive plan | - | - | (9 | ) | - | 9 | - | - | - | |||||||||||||||||||||||
Excess tax benefits in connection with stock option exercises | - | - | 150 | - | - | - | - | 150 | ||||||||||||||||||||||||
Cash dividends declared ($0.50 per share) | - | - | - | - | - | (14,595 | ) | - | (14,595 | ) | ||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2009 | 29,818,526 | 298 | 193,609 | (10,299 | ) | (3,248 | ) | 69,253 | (2,314 | ) | 247,299 | |||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | 3,006 | - | 3,006 | ||||||||||||||||||||||||
Net unrealized losses on securities available for sale arising | ||||||||||||||||||||||||||||||||
during the period, net of reclassification adjustment and tax effects | - | - | - | - | - | - | (11,163 | ) | (11,163 | ) | ||||||||||||||||||||||
Net unrealized gains on securities resulting from transfer from | ||||||||||||||||||||||||||||||||
held-maturity to available-for-sale, net tax effects | - | - | - | - | - | - | 8,351 | 8,351 | ||||||||||||||||||||||||
Change in pension gains or losses and transition assets, net of tax | - | - | - | - | - | - | (390 | ) | (390 | ) | ||||||||||||||||||||||
Total comprehensive loss: | (196 | ) | ||||||||||||||||||||||||||||||
Common stock held by ESOP committed to be released (89,039 shares) | - | - | 149 | 598 | - | - | - | 747 | ||||||||||||||||||||||||
Share-based compensation - stock options | - | - | 798 | - | - | - | - | 798 | ||||||||||||||||||||||||
Share-based compensation - equity incentive plan | - | - | - | - | 1,159 | - | - | 1,159 | ||||||||||||||||||||||||
Excess tax shortfalls from equity incentive plan | - | - | (18 | ) | - | - | - | - | (18 | ) | ||||||||||||||||||||||
Common stock repurchased | (1,988,634 | ) | (19 | ) | (16,108 | ) | - | - | - | - | (16,127 | ) | ||||||||||||||||||||
Issuance of common stock in connection with stock option exercises | 336,527 | 3 | 2,942 | - | - | (1,468 | ) | - | 1,477 | |||||||||||||||||||||||
Issuance of common stock in connection with equity incentive plan | - | - | 69 | - | (69 | ) | - | - | - | |||||||||||||||||||||||
Excess tax benefits in connection with stock option exercises | - | - | 401 | - | - | - | - | 401 | ||||||||||||||||||||||||
Cash dividends declared ($0.52 per share) | - | - | - | - | - | (14,295 | ) | - | (14,295 | ) | ||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2010 | 28,166,419 | $ | 282 | $ | 181,842 | $ | (9,701 | ) | $ | (2,158 | ) | $ | 56,496 | $ | (5,516 | ) | $ | 221,245 | ||||||||||||||
See the accompanying notes to consolidated financial statements. |
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES | ||||||||||||
CONSOLIDATED STATEMENTS OF CASHFLOWS | ||||||||||||
(Dollars in thousands) | ||||||||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 3,006 | $ | 5,459 | $ | 6,691 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Provision for loan losses | 8,923 | 3,900 | 3,453 | |||||||||
Depreciation and amortization of premises and equipment | 1,261 | 1,252 | 1,182 | |||||||||
Net amortization of premiums and discounts on securities and mortgage loans | 6,053 | 1,909 | 178 | |||||||||
Share-based compensation expense | 1,957 | 2,184 | 1,926 | |||||||||
Amortization of ESOP expense | 747 | 824 | 920 | |||||||||
Excess tax shortfalls (benefits) from equity incentive plan | 18 | (5 | ) | 11 | ||||||||
Excess tax benefits in connection with stock option exercises | (401 | ) | (150 | ) | (345 | ) | ||||||
Net (gains) losses on sales of securities | (4,072 | ) | 383 | (1,078 | ) | |||||||
Other-than-temporary impairment losses on securities | 147 | 278 | 1,283 | |||||||||
Write-downs of other real estate owned | 285 | 17 | - | |||||||||
(Gain) loss on sale of other real estate owned, net | (1 | ) | 110 | - | ||||||||
Loss on disposition of premises and equipment, net | - | 8 | - | |||||||||
Loss on prepayment of borrowings | - | 142 | - | |||||||||
Deferred income tax benefit | (389 | ) | (112 | ) | (1,098 | ) | ||||||
Income from bank-owned life insurance | (1,524 | ) | (1,523 | ) | (1,416 | ) | ||||||
Changes in assets and liabilities: | ||||||||||||
Accrued interest receivable | 928 | 37 | 526 | |||||||||
Other assets | 358 | (2,863 | ) | 107 | ||||||||
Other liabilities | 1,059 | (1,411 | ) | (1,245 | ) | |||||||
Net cash provided by operating activities | 18,355 | 10,439 | 11,095 | |||||||||
INVESTING ACTIVITIES: | ||||||||||||
Securities held to maturity: | ||||||||||||
Purchases | (62,111 | ) | (128,489 | ) | (33,379 | ) | ||||||
Proceeds from calls, maturities, and principal collections | 69,075 | 80,215 | 61,927 | |||||||||
Securities available for sale: | ||||||||||||
Purchases | (654,889 | ) | (297,683 | ) | (164,275 | ) | ||||||
Proceeds from sales | 496,990 | 149,809 | 109,195 | |||||||||
Proceeds from calls, maturities, and principal collections | 122,598 | 66,911 | 56,880 | |||||||||
Purchase of residential mortgages | (61,880 | ) | (16,381 | ) | (1,648 | ) | ||||||
Loan originations and principal payments, net | 19,122 | 13,473 | (59,074 | ) | ||||||||
Purchase of Federal Home Loan Bank of Boston stock | (1,912 | ) | (1,883 | ) | (946 | ) | ||||||
Proceeds from sale of other real estate owned | 1,693 | 148 | - | |||||||||
Purchases of premises and equipment | (662 | ) | (1,396 | ) | (536 | ) | ||||||
Purchase of bank-owned life insurance | - | (320 | ) | (2,345 | ) | |||||||
Net cash used in investing activities | (71,976 | ) | (135,596 | ) | (34,201 | ) | ||||||
FINANCING ACTIVITIES: | ||||||||||||
Net increase (decrease) in deposits | 52,360 | 59,946 | (14,647 | ) | ||||||||
Net change in short-term borrowings | (11,562 | ) | 24,675 | 14,556 | ||||||||
Repayment of long-term debt | (20,852 | ) | (80,142 | ) | (20,000 | ) | ||||||
Proceeds from long-term debt | 45,129 | 120,545 | 88,300 | |||||||||
Cash dividends paid | (14,295 | ) | (14,595 | ) | (17,945 | ) | ||||||
Common stock repurchased | (16,127 | ) | (13,690 | ) | (10,483 | ) | ||||||
Issuance of common stock in connection with stock option exercises | 1,477 | 449 | 1,901 | |||||||||
Excess tax (shortfalls) benefits in connection with equity incentive plan | (18 | ) | 5 | (11 | ) | |||||||
Excess tax benefits in connection with stock option exercises | 401 | 150 | 345 | |||||||||
Net cash provided by financing activities | 36,513 | 97,343 | 42,016 | |||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS: | (17,108 | ) | (27,814 | ) | 18,910 | |||||||
Beginning of year | 28,719 | 56,533 | 37,623 | |||||||||
End of year | $ | 11,611 | $ | 28,719 | $ | 56,533 | ||||||
Supplemental cash flow information: | ||||||||||||
Transfer of loans to other real estate owned | $ | 538 | $ | 1,937 | $ | - | ||||||
Increase (decrease) due from broker | 7,791 | (27,603 | ) | 27,603 | ||||||||
Securities reclassified from held-to-maturity to available-for-sale | 287,074 | - | - | |||||||||
See the accompanying notes to consolidated financial statements |
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
INTEREST AND DIVIDEND INCOME: |
|
|
|
|
|
Debt securities, taxable | $ 24,362 |
| $ 21,983 |
| $ 14,396 |
Residential and commercial real estate loans | 18,783 |
| 18,193 |
| 17,551 |
Commercial and industrial loans | 8,032 |
| 8,301 |
| 7,475 |
Debt securities, tax-exempt | 1,389 |
| 1,303 |
| 1,230 |
Equity securities | 574 |
| 643 |
| 501 |
Consumer loans | 322 |
| 361 |
| 410 |
Federal funds sold | 591 |
| 2,700 |
| 770 |
Interest-bearing deposits and other short-term | 3 |
| 100 |
| 102 |
Total interest and dividend income | 54,056 |
| 53,584 |
| 42,435 |
|
|
|
|
|
|
INTEREST EXPENSE: |
|
|
|
|
|
Deposits | 15,133 |
| 19,544 |
| 17,268 |
Short-term borrowings | 880 |
| 728 |
| 627 |
Long-term debt | 6,291 |
| 3,136 |
| 1,656 |
Total interest expense | 22,304 |
| 23,408 |
| 19,551 |
|
|
|
|
|
|
Net interest and dividend income | 31,752 |
| 30,176 |
| 22,884 |
|
|
|
|
|
|
PROVISION FOR LOAN LOSSES | 3,453 |
| 400 |
| 390 |
|
|
|
|
|
|
Net interest and dividend income after | 28,299 |
| 29,776 |
| 22,494 |
|
|
|
|
|
|
NONINTEREST INCOME: |
|
|
|
|
|
Income from bank-owned life insurance | 1,357 |
| 1,259 |
| 800 |
Service charges and fees | 2,368 |
| 2,400 |
| 2,651 |
Gain (loss) on sales of premises and equipment, net | - |
| 546 |
| (378) |
Gain on sales of securities, net | 1,078 |
| 41 |
| - |
Other than temporary impairment of securities | (1,283) |
| - |
| - |
Curtailment of defined benefit life insurance plan | - |
| 315 |
| - |
Total noninterest income | 3,520 |
| 4,561 |
| 3,073 |
|
|
|
|
|
|
NONINTEREST EXPENSE: |
|
|
|
|
|
Salaries and employees benefits | 14,660 |
| 13,739 |
| 11,985 |
Occupancy | 2,448 |
| 2,368 |
| 2,060 |
Professional fees | 1,625 |
| 1,400 |
| 1,081 |
Data processing | 1,717 |
| 1,447 |
| 1,446 |
Stationery, supplies and postage | 484 |
| 498 |
| 510 |
Other | 2,399 |
| 2,373 |
| 2,308 |
Total noninterest expense | 23,333 |
| 21,825 |
| 19,390 |
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES | 8,486 |
| 12,512 |
| 6,177 |
|
|
|
|
|
|
INCOME TAXES | 1,795 |
| 3,812 |
| 1,523 |
|
|
|
|
|
|
NET INCOME | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
|
|
|
|
|
|
EARNINGS PER COMMON SHARE: |
|
|
|
|
|
Basic earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
|
|
|
|
|
|
Weighted average shares outstanding | 29,302,296 |
| 29,896,686 |
| 30,656,584 |
|
|
|
|
|
|
Diluted earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
|
|
|
|
|
|
Weighted average diluted shares outstanding | 29,710,063 |
| 30,397,691 |
| 31,199,823 |
See accompanying notes to consolidated financial statements.
F-3
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
|
|
|
|
|
|
|
|
| Unearned |
| Retained |
| Accumulated |
| Total |
| Common Stock |
| Additional |
| Unearned |
| |||||||||
| Shares |
| Par | ||||||||||||
BALANCE, DECEMBER 31, 2005 | 9,754,757 |
| $ 98 |
| $ 30,120 |
| $ (5,127) |
| $ (861) |
| $ 92,789 |
| $ (1,177) |
| $ 115,842 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | - |
| - |
| - |
| - |
| - |
| 4,654 |
| - |
| 4,654 |
Net unrealized gains on securities available for sale arising during the | - |
| - |
| - |
| - |
| - |
| - |
| 374 |
| 374 |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,028 |
Net proceeds from sale of common stock |
|
| 177 |
| 171,535 |
| - |
| - |
| - |
| - |
| 171,712 |
Common stock held by ESOP committed to be released (60,729 shares) | - |
| - |
| 229 |
| 292 |
| - |
| - |
| - |
| 521 |
Adjustment to initially apply FASB Statement No. 158, net of tax | - |
| - |
| - |
| - |
| - |
| - |
| 77 |
| 77 |
Share-based compensation - stock options | - |
| - |
| 317 |
| - |
| - |
| - |
| - |
| 317 |
Share-based compensation - equity incentive plan | - |
| - |
| - |
| - |
| 456 |
| - |
| - |
| 456 |
Excess tax benefits from equity incentive plan | - |
| - |
| 260 |
| - |
| - |
| - |
| - |
| 260 |
Common stock repurchased | (65,000) |
| (1) |
| (1,582) |
| - |
| - |
| - |
| - |
| (1,583) |
Issuance of common stock in connection with stock option exercises | 39,155 |
| - |
| 857 |
| - |
| - |
| (294) |
| - |
| 563 |
Cash dividends declared ($0.32 per share) | - |
| - |
| - |
| - |
| - |
| (3,785) |
| - |
| (3,785) |
BALANCE, DECEMBER 31, 2006 | 9,728,912 |
| 274 |
| 201,736 |
| (4,835) |
| (405) |
| 93,364 |
| (726) |
| 289,408 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | - |
| - |
| - |
| - |
| - |
| 8,700 |
| - |
| 8,700 |
Net unrealized gains on securities available for sale arising during the | - |
| - |
| - |
| - |
| - |
| - |
| 1,298 |
| 1,298 |
Change in pension gains or losses and transition assets, net of tax | - |
| - |
| - |
| - |
| - |
| - |
| 477 |
| 477 |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,475 |
Exchange of common stock pursuant to reorganization (9,728,912 shares | 21,458,993 |
| 38 |
| (358) |
| - |
| - |
| - |
| - |
| (320) |
Capital contribution pursuant to dissolution of Mutual Holding Company | - |
| - |
| - |
| - |
| - |
| 2,713 |
| - |
| 2,713 |
Common stock held by ESOP committed to be released (96,182 shares) | - |
| - |
| 320 |
| 653 |
| - |
| - |
| - |
| 973 |
Share-based compensation - stock options | - |
| - |
| 418 |
| - |
| - |
| - |
| - |
| 418 |
Share-based compensation - equity incentive plan | - |
| - |
| - |
| - |
| 751 |
| - |
| - |
| 751 |
Establishment of equity incentive plan - restricted stock | - |
| - |
| 5,839 |
| - |
| (5,839) |
| - |
| - |
| - |
Excess tax benefits from equity incentive plan | - |
| - |
| 222 |
| - |
| - |
| - |
| - |
| 222 |
Purchase of ESOP Shares | 736,000 |
| 7 |
| 7,353 |
| (7,360) |
| - |
| - |
| - |
| - |
Purchase of common stock in connection equity incentive plan | - |
| - |
| (6,075) |
| - |
| - |
| - |
| - |
| (6,075) |
Issuance of common stock in connection with stock option exercises | 9,644 |
| - |
| 42 |
| - |
| - |
| - |
| - |
| 42 |
Cash dividends declared ($0.40 per share) | - |
| - |
| - |
| - |
| - |
| (12,075) |
| - |
| (12,075) |
BALANCE, DECEMBER 31, 2007 | 31,933,549 |
| 319 |
| 209,497 |
| (11,542) |
| (5,493) |
| 92,702 |
| 1,049 |
| 286,532 |
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | - |
| - |
| - |
| - |
| - |
| 6,691 |
| - |
| 6,691 |
Net unrealized gains on securities available for sale arising during the | - |
| - |
| - |
| - |
| - |
| - |
| (7,376) |
| (7,376) |
Change in pension gains or losses and transition assets, net of tax | - |
| - |
| - |
| - |
| - |
| - |
| (2,581) |
| (2,581) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,266) |
Common stock held by ESOP committed to be released (93,947 shares) | - |
| - |
| 291 |
| 629 |
| - |
| - |
| - |
| 920 |
Share-based compensation - stock options | - |
| - |
| 770 |
| - |
| - |
| - |
| - |
| 770 |
Share-based compensation - equity incentive plan | - |
| - |
| - |
| - |
| 1,156 |
| - |
| - |
| 1,156 |
Excess tax shortfalls from equity incentive plan | - |
| - |
| (11) |
| - |
| - |
| - |
| - |
| (11) |
Common stock repurchased | (1,058,778) |
| (10) |
| (10,473) |
| - |
| - |
| - |
| - |
| (10,483) |
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 ($0.60 per share) | - |
| - |
| - |
| - |
| - |
| (17,945) |
| - |
| (17,945) |
BALANCE, DECEMBER 31, 2008 | 31,307,881 |
| $ 313 |
| $ 204,866 |
| $ (10,913) |
| $ (4,337) |
| $ 78,898 |
| $ (8,908) |
| $ 259,919 |
| |||||||||||||||
See the accompanying notes to consolidated financial statements. |
F-4
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
(Dollars in thousands)
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
OPERATING ACTIVITIES: |
|
|
|
|
|
Net Income | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
Adjustments to reconcile net income to net cash provided |
|
|
|
|
|
by operating activities: |
|
|
|
|
|
Provision for loan losses | 3,453 |
| 400 |
| 390 |
Depreciation and amortization of premises and equipment | 1,182 |
| 1,096 |
| 1,030 |
Net amortization of premiums and discounts on securities, mortgage- |
|
|
|
|
|
backed securities and mortgage loans | 178 |
| 321 |
| 657 |
Share-based compensation expense | 1,926 |
| 1,169 |
| 773 |
Amortization of ESOP expense | 920 |
| 973 |
| 521 |
Excess tax shortfalls (benefits) from equity incentive plan | 11 |
| (222) |
| (260) |
Excess tax benefits in connection with stock option exercises | (345) |
| - |
| - |
Net gains on sales of securities | (1,078) |
| (41) |
| - |
Other than temporary impairment of securities | 1,283 |
| - |
| - |
(Gain) loss on sale of premises and equipment, net | - |
| (546) |
| 378 |
Deferred income tax benefit | (1,098) |
| (184) |
| (256) |
Income from bank-owned life insurance | (1,357) |
| (1,259) |
| (800) |
Changes in assets and liabilities: |
|
|
|
|
|
Accrued interest receivable | 526 |
| (1,259) |
| (649) |
Other assets | 48 |
| 376 |
| (436) |
Other liabilities | (1,245) |
| 1,236 |
| 530 |
Net cash provided by operating activities | 11,095 |
| 10,760 |
| 6,532 |
INVESTING ACTIVITIES: |
|
|
|
|
|
Securities, held to maturity: |
|
|
|
|
|
Purchases | (2,290) |
| (41,738) |
| (17,097) |
Proceeds from calls, maturities, and principal collections | 27,010 |
| 15,000 |
| 13,000 |
Securities, available for sale: |
|
|
|
|
|
Purchases | (22,346) |
| (26,281) | �� | (21,295) |
Proceeds from sales | 20,304 |
| 15,147 |
| 5,000 |
Proceeds from calls, maturities, and principal collections | 14,992 |
| 15,023 |
| 3,000 |
Mortgage-backed securities, held to maturity: |
|
|
|
|
|
Purchases | (31,089) |
| (49,078) |
| (48,727) |
Principal collections | 34,917 |
| 39,560 |
| 37,368 |
Mortgage-backed securities, available for sale: |
|
|
|
|
|
Purchases | (141,929) |
| (111,304) |
| (51,720) |
Proceeds from sales | 88,891 |
| 272 |
| - |
Principal collections | 41,888 |
| 33,634 |
| 26,307 |
Purchase of residential mortgages | (1,648) |
| (1,759) |
| (11,845) |
Net other (increase) decrease in loans | (59,074) |
| (28,388) |
| 5,080 |
Purchase of Federal Home Loan Bank of Boston stock | (946) |
| (3,481) |
| (9) |
Proceeds from redemption of Federal Home Loan Bank of Boston stock | - |
| 217 |
| - |
Purchases of premises and equipment | (536) |
| (1,935) |
| (2,618) |
Proceeds from sale of premises and equipment | - |
| 920 |
| 10 |
Purchase of bank-owned life insurance | (2,345) |
| (10,520) |
| - |
Net cash used in investing activities | (34,201) |
| (154,711) |
| (63,546) |
FINANCING ACTIVITIES: |
|
|
|
|
|
Net (decrease) increase in deposits | (14,647) |
| (24,790) |
| 4,421 |
Net change in short-term borrowings | 14,556 |
| 7,349 |
| 13,478 |
Repayment of long-term debt | (20,000) |
| (20,000) |
| (10,000) |
Proceeds from long-term debt | 88,300 |
| 80,000 |
| 10,000 |
Cash dividends paid | (17,945) |
| (12,075) |
| (3,785) |
Net proceeds from sale of common stock | - |
| - |
| 171,712 |
Exchange of common stock pursuant to reorganization | - |
| (320) |
| - |
Capital contribution pursuant to dissolution of MHC | - |
| 2,713 |
| - |
Common stock repurchased | (10,483) |
| - |
| (1,583) |
Issuance of common stock in connection with stock option exercises | 1,901 |
| 42 |
| 563 |
Excess tax (shortfalls) benefits in connection with equity incentive plan | (11) |
| 222 |
| 260 |
Excess tax benefits in connection with stock option exercises | 345 |
| - |
| - |
Purchase of common stock in connection with equity incentive plan | - |
| (6,075) |
| - |
Net cash provided by financing activities | 42,016 |
| 27,066 |
| 185,066 |
NET CHANGE IN CASH AND CASH EQUIVALENTS: | 18,910 |
| (116,885) |
| 128,052 |
Beginning of period | 37,623 |
| 154,508 |
| 26,456 |
End of period | $ 56,533 |
| $ 37,623 |
| $ 154,508 |
Supplemental cash flow information: |
|
|
|
|
|
Net cash due to broker for purchase of mortgage-backed securities, |
|
|
|
|
|
available for sale | $ (27,603) |
| $ - |
| $ - |
| |||||
See the accompanying notes to consolidated financial statements |
F-5
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2008
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On January 3, 2007, Westfield Financial completed its stock offering in connection with the second step conversion of Westfield Mutual Holding Company. As part of the conversion, New Westfield Financial, Inc. succeeded Westfield Financial as the stock holding company of Westfield Bank, and Westfield Mutual Holding Company was dissolved. In the stock offering, a total of 18,400,000 shares representing Westfield Mutual Holding Company's ownership interest in Westfield Financial were sold by New Westfield Financial in a subscription offering, community offering and syndicated offering. In addition, each outstanding share of Westfield Financial as of January 3, 2007 was exchanged for 3.28138 new shares of New Westfield Financial common stock. New Westfield Financial, Inc. changed its name to Westfield Financial, Inc. effective January 3, 2007.
The conversion was accounted for as a reorganization in corporate form with no change in the historical basis of Westfield Financial's assets, liabilities, and equity. All references to the number of shares outstanding, including references for purposes of calculating per share amounts, are restated to give retroactive recognition to the exchange ratio applied in the conversion.
Westfield Bank is a federally-chartered stock savings bank subsidiary of (the “Bank”).
In October 2009, WB Real Estate Holdings, LLC, a Massachusetts-chartered limited liability company was formed for the primary purpose of holding real property acquired as security for debts previously contracted by the Bank.
F-6
Other than Temporary
value requires significant management judgment or estimation.
F-7
The recorded investment in FHLB stock is $12.0 million and $10.1 million at December 31, 2010 and 2009, respectively.
Westfield Bank maintains an
cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
F-8
In addition,loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.
modification is considered a troubled debt restructuring (“TDR”). All TDRs are initially classified as impaired.
Years | |
| |
Buildings | 39 |
|
|
|
|
Furniture and Equipment | 3-7 |
F-9
The compensation cost of an employee’s pension benefit is recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method is utilized for funding purposes.
Westfield Financial
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans” (“SFAS 158”), which requires employers to (a) recognize in its statement of financial position the funded status of a benefit plan, (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year, (c) recognize, through other comprehensive income, net of tax, changes in the funded status of the benefit plan that are not recognized as net periodic benefit costs, and (d) disclose additional information about certain effects on net periodic benefit cost for the next fiscal year that relate to the delayed recognition of certain benefit cost elements. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end is effective for the year ended December 31, 2008.
F-10
realized based on the available evidence including historical and projected taxable income. We do not have any uncertain tax positions at December 31, 2010 which require accrual or disclosure. We record interest and penalties as part of income tax expense. No interest or penalties were recorded for the years ended December 31, 2010, 2009 and 2008.
Years Ended December 31, | |||||||||||||
2010 | 2009 | 2008 | |||||||||||
(In thousands, except per share data) | |||||||||||||
Net income applicable to common stock | $ | 3,006 | $ | 5,459 | $ | 6,691 | |||||||
Average number of common shares issued | 29,063 | 30,873 | 31,509 | ||||||||||
Less: Average unallocated ESOP Shares | (1,426 | ) | (1,513 | ) | (1,606 | ) | |||||||
Average ungranted equity incentive plan shares | (42 | ) | (51 | ) | (65 | ) | |||||||
Average number of common shares outstanding used | |||||||||||||
to calculate basic earnings per common share(1) | 27,595 | 29,309 | 29,838 | ||||||||||
Effect of dilutive stock options | 198 | 269 | 352 | ||||||||||
Average number of common shares outstanding used | |||||||||||||
to calculate diluted earnings per common share | 27,793 | 29,578 | 30,190 | ||||||||||
Basic earnings per share | $ | 0.11 | $ | 0.19 | $ | 0.22 | |||||||
Diluted earnings per share | $ | 0.11 | $ | 0.18 | $ | 0.22 |
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands, except per share data) | ||||
|
|
|
|
|
|
Net income applicable to common stock | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
|
|
|
|
|
|
Average number of common shares issued | 31,509 |
| 31,927 |
| 31,884 |
Less: Average unallocated ESOP Shares | (1,610) |
| (1,701) |
| (1,043) |
Less: Average nonvested equity incentive plan shares | (597) |
| (329) |
| (184) |
|
|
|
|
|
|
Average number of common shares outstanding used | 29,302 |
| 29,897 |
| 30,657 |
|
|
|
|
|
|
Effect of dilutive unvested restricted stock awards | 56 |
| 51 |
| 127 |
Effect of dilutive stock options | 352 |
| 450 |
| 416 |
|
|
|
|
|
|
Average number of common shares outstanding used | 29,710 |
| 30,398 |
| 31,200 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
|
|
|
|
|
|
Diluted earnings per share | $ 0.23 |
| $ 0.29 |
| $ 0.15 |
respectively.
Reclassifications –Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
F-11
income/loss.
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Unrealized holding (losses) gains on available for sale securities | $ | (12,766 | ) | $ | 8,548 | $ | (11,899 | ) | ||||
Reclassification adjustment for securities transferred from held-to-maturity to available-for-sale | 12,653 | - | - | |||||||||
Reclassification adjustment for (gains) losses realized in income | (4,072 | ) | 383 | (1,078 | ) | |||||||
Other-than-temporary impairment losses on available-for-sale securities | 147 | 278 | 1,283 | |||||||||
Net unrealized (losses) gains on available for sale securities | (4,038 | ) | 9,209 | (11,694 | ) | |||||||
Tax effect | 1,226 | (3,290 | ) | 4,318 | ||||||||
Net-of-tax amount | (2,812 | ) | 5,919 | (7,376 | ) | |||||||
Gains and losses arising during the year pertaining to defined benefit plans | (670 | ) | 898 | (3,852 | ) | |||||||
Reclassification adjustments for items reflected in earnings: | ||||||||||||
Actuarial loss (gain) | 91 | 137 | (45 | ) | ||||||||
Transition asset | (12 | ) | (12 | ) | (13 | ) | ||||||
Net adjustments pertaining to defined benefit plans | (591 | ) | 1,023 | (3,910 | ) | |||||||
Tax effect | 201 | (348 | ) | 1,329 | ||||||||
Net-of-tax amount | (390 | ) | 675 | (2,581 | ) | |||||||
Net other comprehensive (loss) income | $ | (3,202 | ) | $ | 6,594 | $ | (9,957 | ) |
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
Unrealized holding (losses) gains on available for sale | $ (11,899) |
| $ 2,096 |
| $ 578 |
securities |
|
|
|
|
|
Reclassification adjustment for losses (gains) |
|
|
|
|
|
realized in income | 205 |
| (41) |
| - |
Net unrealized (losses) gains on available for sale securities | (11,694) |
| 2,055 |
| 578 |
Tax effect | 4,318 |
| (757) |
| (204) |
Net-of-tax amount | (7,376) |
| 1,298 |
| 374 |
|
|
|
|
|
|
Gains and losses arising during the period pertaining |
|
|
|
|
|
to defined benefit plans | (3,897) |
| 734 |
| 25 |
Reclassification adjustment for transition asset recognized |
|
|
|
|
|
in net periodic benefit cost pertaing to defined benefit plans | (13) |
| (11) |
| 92 |
Net adjustments pertaining to defined benefit plans | (3,910) |
| 723 |
| 117 |
Tax effect | 1,329 |
| (246) |
| (40) |
Net-of-tax amount | (2,581) |
| 477 |
| 77 |
|
|
|
|
|
|
Net other comprehensive (loss) income | $ (9,957) |
| $ 1,775 |
| $ 451 |
| December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
Net unrealized (loss) gain on securities |
|
|
|
available for sale | $ (10,913) |
| $ 781 |
Tax effect | 4,032 |
| (286) |
Net-of-tax amount | (6,881) |
| 495 |
|
|
|
|
Unrecognized transition asset pertaining |
|
|
|
to defined benefit plan | 68 |
| 81 |
Unrecognized deferred (loss) gain pertaining |
|
|
|
to defined benefit plan | (3,138) |
| 759 |
| (3,070) |
| 840 |
Tax effect | 1,043 |
| (286) |
Net-of-tax amount | (2,027) |
| 554 |
|
|
|
|
Net accumulated other comprehensive (loss) income | $ (8,908) |
| $ 1,049 |
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Net unrealized loss on securities available for sale | $ | (5,299 | ) | $ | (228 | ) | ||
Tax effect | 1,817 | 138 | ||||||
Net-of-tax amount | (3,482 | ) | (90 | ) | ||||
Noncredit portion of other-than-temporary impairment losses on available for sale securities | (443 | ) | (1,476 | ) | ||||
Tax effect | 151 | 604 | ||||||
Net-of-tax amount | (292 | ) | (872 | ) | ||||
Unrecognized transition assets pertaining to defined benefit plans | 44 | 56 | ||||||
Unrecognized deferred loss pertaining to defined benefit plan | (2,682 | ) | (2,103 | ) | ||||
Net accumulated other comprehensive loss pertaining to defined benefit plans | (2,638 | ) | (2,047 | ) | ||||
Tax effect | 896 | 695 | ||||||
Net-of-tax amount | (1,742 | ) | (1,352 | ) | ||||
Net accumulated other comprehensive loss | $ | (5,516 | ) | $ | (2,314 | ) |
2011.
F-12
3.
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” This Statement permits entities to choose to measure many financial instruments and certain other items atLevel 3 fair value withmeasurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We adopted this statement, except for the objectiveroll forward of improving financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions, and is expected to expand the use ofactivity for Level 3 fair value measurement. An entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may generally be applied instrument by instrument and is irrevocable. This S tatement was adopted by Westfield Financial onmeasurements, as of January 1, 20082010 and this adoption did not have a material impact on theour consolidated financial statements.
statements.
F-13
In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No.51 (“ARB No. 51”). This Statement amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidationend of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.
In March of 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.” This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entitiesreporting period are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.
In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This staff position requires disclosure of information about how investment allocation decisions are made, the fair value of each major category of plan assets and the inputs and valuation techniques used to develop fair value measurements. Also, an employer shall provide users of financial statements with an understanding of significant concentrations of risk in plan assets. In addition, it requires a nonpublic entity that sponsors one or more defined benefit pension or postretirement plans to di sclose the net periodic benefit cost recognized for each annual period for which an annual statement of income is presented. The disclosures about plan assets are required for fiscal years ending after December 15, 2009 and are not expected to have a material impact on the consolidated financial statements of Westfield Financial. The requirement to disclose the net periodic benefit cost is effective as of December 31, 2008. This disclosure has been provided in these consolidated financial statements and did not have a material impact on the consolidated financial statements as of December 31, 2008. Upon initial adoption of FSP 132(R)-1, disclosures are not required for earlier periods that are presented for comparative purposes.
In January 2009, the FASB issued FASB Staff Position No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No.99-20” (“FSP 99-20-1”). FSP 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other than temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other than temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance. FSP 99-20-1 is effective for interim and annual reporting periods ending on or after December 15, 2008. This Statement did2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. We have provided the disclosures required as of December 31, 2010 in Note 3.
statements.
F-14
2.
SECURITIES
December 31, 2010 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | $ | 381,436 | $ | 4,967 | $ | (5,419 | ) | $ | 380,984 | |||||||
U.S. government guaranteed residential mortgage-backed securities | 192,609 | 396 | (5,329 | ) | 187,676 | |||||||||||
Private-label residential mortgage-backed securities | 8,251 | - | (673 | ) | 7,578 | |||||||||||
Government-sponsored enterprise obligations | 18,447 | 193 | (776 | ) | 17,864 | |||||||||||
Municipal bonds | 42,119 | 1,298 | (340 | ) | 43,077 | |||||||||||
Mutual funds | 6,949 | 25 | (61 | ) | 6,913 | |||||||||||
Common and preferred stock | 70 | - | (23 | ) | 47 | |||||||||||
Total | $ | 649,881 | $ | 6,879 | $ | (12,621 | ) | $ | 644,139 | |||||||
| December 31, 2008 | ||||||
| Amortized |
| Gross |
| Gross |
| Estimated |
| (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 |
December 31, 2009 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | $ | 289,840 | $ | 2,696 | $ | (2,288 | ) | $ | 290,248 | |||||||
U.S. government guaranteed residential mortgage-backed securities | 1,030 | 17 | - | 1,047 | ||||||||||||
Private-label residential mortgage-backed securities | 10,368 | - | (1,858 | ) | 8,510 | |||||||||||
Government-sponsored enterprise obligations | 11,000 | - | (302 | ) | 10,698 | |||||||||||
Municipal bonds | 1,956 | 114 | - | 2,070 | ||||||||||||
Mutual funds | 6,561 | 1 | (73 | ) | 6,489 | |||||||||||
Common and preferred stock | 70 | - | (11 | ) | 59 | |||||||||||
Total available for sale | 320,825 | 2,828 | (4,532 | ) | 319,121 | |||||||||||
Held to maturity: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | 204,484 | 6,111 | (184 | ) | 210,411 | |||||||||||
U.S. government guaranteed residential mortgage-backed securities | 16,334 | 95 | (143 | ) | 16,286 | |||||||||||
Private-label residential mortgage-backed securities | 4,949 | 44 | (435 | ) | 4,558 | |||||||||||
Government-sponsored enterprise obligations | 34,884 | 1,776 | - | 36,660 | ||||||||||||
Municipal bonds | 34,360 | 1,353 | (9 | ) | 35,704 | |||||||||||
Total held to maturity | 295,011 | 9,379 | (771 | ) | 303,619 | |||||||||||
Total securities | $ | 615,836 | $ | 12,207 | $ | (5,303 | ) | $ | 622,740 |
| December 31, 2007 | ||||||
| Amortized |
| Gross |
| Gross |
| Estimated |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Government-sponsored enterprises | $ 71,884 |
| $ 1,444 |
| $ 20 |
| $ 73,308 |
Municipal bonds | 32,141 |
| 442 |
| 62 |
| 32,521 |
|
|
|
|
|
|
|
|
Total held to maturity | 104,025 |
| 1,886 |
| 82 |
| 105,829 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
Government-sponsored enterprises | 30,022 |
| 308 |
| - |
| 30,330 |
Municipal bonds | 852 |
| 29 |
| - |
| 881 |
Equity Securities | 7,364 |
| - |
| 524 |
| 6,840 |
|
|
|
|
|
|
|
|
Total available for sale | 38,238 |
| 337 |
| 524 |
| 38,051 |
|
|
|
|
|
|
|
|
Total Securities | $ 142,263 |
| $ 2,223 |
| $ 606 |
| $ 143,880 |
December 31, 2010 | ||||||||
Amortized Cost | Fair Value | |||||||
(In thousands) | ||||||||
Available for sale: | ||||||||
Due in one year or less | $ | 896 | $ | 902 | ||||
Due after one year through five years | 18,311 | 18,811 | ||||||
Due after five years through ten years | 21,361 | 21,960 | ||||||
Due after ten years | 19,998 | 19,268 | ||||||
Total available for sale | $ | 60,566 | $ | 60,941 |
Years Ended Decmeber 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Gross gains realized | $ | 6,346 | $ | 2,033 | $ | 1,246 | ||||||
Gross losses realized | (2,274 | ) | (2,416 | ) | (168 | ) | ||||||
Net gain (loss) realized | $ | 4,072 | $ | (383 | ) | $ | 1,078 |
F-15
| December 31, 2008 | ||||||
| Less Than Twelve Months |
| Over Twelve Months | ||||
| Gross |
| Fair Value |
| Gross |
| Fair Value |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Municipal bonds | $ 155 |
| $ 6,677 |
| $ 24 |
| $ 1,585 |
|
|
|
|
|
|
|
|
Total held to maturity | 155 |
| 6,677 |
| 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 |
| December 31, 2007 | ||||||
| Less Than Twelve Months |
| Over Twelve Months | ||||
| Gross |
| Fair Value |
| Gross |
| Fair Value |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Government-sponsored enterprises | $ - |
| $ - |
| $ 20 |
| $ 7,992 |
Municipal bonds | 27 |
| 3,131 |
| 35 |
| 2,777 |
|
|
|
|
|
|
|
|
Total held to maturity | 27 |
| 3,131 |
| 55 |
| 10,769 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
| ||||
Equity Securities | - |
| - |
| 524 |
| 5,477 |
|
|
|
|
|
|
|
|
Total available for sale | - |
| - |
| 524 |
| 5,477 |
|
|
|
|
|
|
|
|
Total | $ 27 |
| $ 3,131 |
| $ 579 |
| $ 16,246 |
December 31, 2010 | ||||||||||||||||
Less Than Twelve Months | Over Twelve Months | |||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | $ | (5,419 | ) | $ | 225,105 | $ | - | $ | - | |||||||
U.S. government guaranteed residential mortgage-backed securities | (5,329 | ) | 145,430 | - | - | |||||||||||
Private-label residential mortgage-backed securities | - | - | (673 | ) | 7,578 | |||||||||||
Government-sponsored enterprise obligations | (776 | ) | 15,674 | - | - | |||||||||||
Municipal bonds | (340 | ) | 8,856 | - | - | |||||||||||
Mutual funds | - | - | (61 | ) | 1,548 | |||||||||||
Common and preferred stock | - | - | (23 | ) | 16 | |||||||||||
Total | $ | (11,864 | ) | $ | 395,065 | $ | (757 | ) | $ | 9,142 | ||||||
December 31, 2009 | ||||||||||||||||
Less Than Twelve Months | Over Twelve Months | |||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | $ | (2,287 | ) | $ | 170,741 | $ | (1 | ) | $ | 128 | ||||||
Private-label residential mortgage-backed securities | - | - | (1,858 | ) | 8,510 | |||||||||||
Government-sponsored enterprise obligations | (302 | ) | 10,698 | - | - | |||||||||||
Mutual funds | (19 | ) | 2,597 | (54 | ) | 1,479 | ||||||||||
Common and preferred stock | (11 | ) | 28 | - | - | |||||||||||
Total available for sale | (2,619 | ) | 184,064 | (1,913 | ) | 10,117 | ||||||||||
Held to maturity: | ||||||||||||||||
Government-sponsored residential mortgage-backed securities | (159 | ) | 21,227 | (25 | ) | 1,677 | ||||||||||
U.S. government guaranteed residential mortgage-backed securities | (143 | ) | 9,760 | - | - | |||||||||||
Private-label residential mortgage-backed securities | - | - | (435 | ) | 3,123 | |||||||||||
Municipal bonds | (9 | ) | 356 | - | - | |||||||||||
Total held to maturity | (311 | ) | 31,343 | (460 | ) | 4,800 | ||||||||||
Total | $ | (2,930 | ) | $ | 215,407 | $ | (2,373 | ) | $ | 14,917 |
F-16
At December 31, 2008, three debt securities have2010, two government-sponsored enterprise obligations had gross unrealized losses with aggregate depreciation of 1.5%4.7% from Westfield Financial’sour amortized cost basis which have existedexisting for greaterless than twelve months. Because theseThese losses relate to highly rated municipal obligations, are the result of fluctuations in interest rates and management hasnot credit quality. Because we do not intend to sell the intentsecurities and abilityit is more likely than not that we will not be required to hold thesesell the securities for the foreseeable future,before recovery of their amortized cost basis, no declines are deemed to be other than temporary at December 31, 2008.
other-than-temporary.
temporary.
The amortized cost and fair value of debt securities at December 31, 2008, by maturity, are shown below. Actual maturities may differ from contractual maturities because certain issues have the right to call or repay obligations.
|
|
|
|
| December 31, 2008 | ||
|
|
|
|
| Amortized |
| Estimated |
|
|
|
|
| Cost |
| Fair Value |
|
|
|
|
| (In thousands) | ||
Held to maturity: |
|
|
|
|
|
| |
| Due in one year or less |
| $ - |
| $ - | ||
| Due after one year through five years | 20,930 |
| 21,332 | |||
| Due after five years through ten years | 44,114 |
| 46,983 | |||
| Due after ten years |
| 14,259 |
| 14,176 | ||
|
|
|
|
|
|
|
|
Total held to maturity |
|
| $ 79,303 |
| $ 82,491 | ||
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
| |
| Due in one year or less |
| $ - |
| $ - | ||
| Due after one year through five years | 5,018 |
| 5,161 | |||
| Due after five years through ten years | 850 |
| 877 | |||
| Due after ten years |
| 12,107 |
| 12,231 | ||
|
|
|
|
|
|
|
|
Total available for sale |
|
| $ 17,975 |
| $ 18,269 |
Proceeds from the sale of securities available for sale amounted to $ 20.3 million, $15.1 million and $5.0 million for the years ended December 31, 2008, 2007 and 2006, respectively.
Gross realized gains of $293,000, $51,000 and $0, and gross realized losses of $11,000, $13,000, and $0 were recorded on securities during the years ended December 31, 2008, 2007, and 2006, respectively. Westfield Financial recorded gross losses of $1.3 million due to other than temporary impairment in value of securities during the year ended December 31, 2008. There were no impairment losses recognized during the years ended December 31, 2007 and 2006.
At December 31, 2008 and 2007, 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.
F-17
3.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are summarized as follows:
| December 31, 2008 | ||||||
| Amortized |
| Gross |
| Gross |
| Estimated |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Fannie Mae | $ 89,910 |
| $ 1,207 |
| $ 341 |
| $ 90,776 |
Freddie Mac | 64,067 |
| 1,264 |
| 225 |
| 65,106 |
Ginnie Mae | 7,892 |
| 1 |
| 340 |
| 7,553 |
Collateralized mortgage obligations | 6,463 |
| - |
| 1,182 |
| 5,281 |
|
|
|
|
|
|
|
|
Total held to maturity | 168,332 |
| 2,472 |
| 2,088 |
| 168,716 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
Fannie Mae | 105,397 |
| 476 |
| 569 |
| 105,304 |
Freddie Mac | 56,529 |
| 642 |
| 199 |
| 56,972 |
Ginnie Mae | 40,401 |
| 181 |
| 158 |
| 40,424 |
Collateralized mortgage obligations | 42,453 |
| - |
| 11,406 |
| 31,047 |
|
|
|
|
|
|
|
|
Total available for sale | 244,780 |
| 1,299 |
| 12,332 |
| 233,747 |
|
|
|
|
|
|
|
|
Total mortgage-backed securities | $ 413,112 |
| $ 3,771 |
| $ 14,420 |
| $ 402,463 |
| December 31, 2007 | ||||||
| Amortized |
| Gross |
| Gross |
| Estimated |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Fannie Mae | $ 102,354 |
| $ 669 |
| $ 753 |
| $ 102,270 |
Freddie Mac | 55,251 |
| 341 |
| 259 |
| 55,333 |
Ginnie Mae | 10,208 |
| 18 |
| 30 |
| 10,196 |
Collateralized mortgage obligations | 6,781 |
| 35 |
| 65 |
| 6,751 |
|
|
|
|
|
|
|
|
Total held to maturity | 174,594 |
| 1,063 |
| 1,107 |
| 174,550 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
Fannie Mae | 74,062 |
| 669 |
| 73 |
| 74,658 |
Freddie Mac | 86,411 |
| 917 |
| 126 |
| 87,202 |
Ginnie Mae | 5,674 |
| 29 |
| 16 |
| 5,687 |
Collateralized mortgage obligations | 39,063 |
| 75 |
| 507 |
| 38,631 |
|
|
|
|
|
|
|
|
Total available for sale | 205,210 |
| 1,690 |
| 722 |
| 206,178 |
|
|
|
|
|
|
|
|
Total mortgage backed securities | $ 379,804 |
| $ 2,753 |
| $ 1,829 |
| $ 380,728 |
F-18
Proceeds from the sale of mortgage-backed securities available for sale amounted to $88.9 million, $272,000 and $0 at December 31, 2008, 2007 and 2006, respectively.
Gross realized gains of $953,000, $3,000 and $0 and gross realized losses of $157,000, $0, and $0 were recorded on sales of mortgage-backed securities during the years ended December 31, 2008, 2007, and 2006, respectively.
Information pertaining to securities with gross unrealized losses at December 31, 2008 and 2007 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
| December 31, 2008 | ||||||
| Less Than Twelve Months |
| Over Twelve Months | ||||
| Gross |
| Fair Value |
| Gross |
| Fair Value |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Fannie Mae | $ 216 |
| $ 14,402 |
| $ 125 |
| $ 8,662 |
Freddie Mac | 141 |
| 13,742 |
| 84 |
| 2,667 |
Ginnie Mae | 266 |
| 5,482 |
| 74 |
| 1,867 |
Collateralized mortgage obligations | 1,182 |
| 5,282 |
| - |
| - |
|
|
|
|
|
|
|
|
Total held to maturity | 1,805 |
| 38,908 |
| 283 |
| 13,196 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
Fannie Mae | 479 |
| 42,746 |
| 90 |
| 11,416 |
Freddie Mac | 147 |
| 9,802 |
| 52 |
| 10,794 |
Ginnie Mae | 147 |
| 3,842 |
| 11 |
| 251 |
Collateralized mortgage obligations | 6,953 |
| 28,423 |
| 4,453 |
| 2,624 |
|
|
|
|
|
|
|
|
Total available for sale | 7,726 |
| 84,813 |
| 4,606 |
| 25,085 |
|
|
|
|
|
|
|
|
Total | $ 9,531 |
| $ 123,721 |
| $ 4,889 |
| $ 38,281 |
F-19
| December 31, 2007 | ||||||
| Less Than Twelve Months |
| Over Twelve Months | ||||
| Gross |
| Fair Value |
| Gross |
| Fair Value |
| (In thousands) | ||||||
Held to maturity: |
|
|
|
|
|
|
|
Fannie Mae | $ 2 |
| $ 484 |
| $ 751 |
| $ 43,522 |
Freddie Mac | 27 |
| 3,612 |
| 232 |
| 10,717 |
Ginnie Mae | 5 |
| 2,376 |
| 25 |
| 3,115 |
Collateralized mortgage obligations | 65 |
| 4,458 |
| - |
| - |
|
|
|
|
|
|
|
|
Total held to maturity | 99 |
| 10,930 |
| 1,008 |
| 57,354 |
|
|
|
|
|
|
|
|
Available for sale: |
|
|
|
|
|
|
|
Fannie Mae | 2 |
| 2,294 |
| 71 |
| 13,070 |
Freddie Mac | 67 |
| 8,624 |
| 59 |
| 6,803 |
Ginnie Mae | 1 |
| 236 |
| 15 |
| 2,585 |
Collateralized mortgage obligations | 471 |
| 23,104 |
| 36 |
| 2,596 |
|
|
|
|
|
|
|
|
Total available for sale | 541 |
| 34,258 |
| 181 |
| 25,054 |
|
|
|
|
|
|
|
|
Total | $ 640 |
| $ 45,188 |
| $ 1,189 |
| $ 82,408 |
At December 31, 2008, eighty-eight mortgage-backed securities have gross unrealized losses with aggregate depreciation of 7.2% from Westfield Financial’s amortized cost basis which have existed for less than twelve months. At December 31, 2008, thirty-two2010, four private label mortgage-backed securities have gross unrealized losses of 1.2%8.2% from Westfield Financial’sour amortized cost basis which existed for greater than twelve months. Because these losses relate toOn a quarterly basis, Management uses a third party that is experienced in analyzing private-label mortgage-backed securities which were primarily issued by government-sponsored enterprises,to determine if credit losses existed for these securities. The third party incorporated a number of factors to estimate the performance and possible credit loss of the underlying assets. These factors include but are thenot limited to: loans in various stages of delinquency i.e. 30, 60, 90 days delinquent, loans in foreclosure, projected prepayment rates (15 voluntary prepayment rate), severity of loss on defaulted loans (40% -55%), current levels of subordination, current credit enhancement (3.55% - 7.87%), vintage (2006), geographic location and projected default rates. As a result of an illiquid market,this analysis, two private label mortgage-backed securities were deemed to have other-than- temporary impairment losses during the year ended December 31, 2010, which resulted in writedowns of $590,000 due to other-than-temporary impairment on mortgage-backed securities, of which $443,000 was recognized in accumulated other comprehensive loss and management has$147,000 was recognized as a credit loss and charged to income. During the intentyear ended December 31, 2009, we had writedowns of $1.8 million due to other-than-temporary impairment on mortgage-backed securities, of which $1.5 million was recognized in accumulated other comprehensive loss and ability$278,000 was recognized as a credit loss and charged to hold theseincome.
Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Balance at beginning of year | $ | 278 | $ | 0 | ||||
Additional credit losses for which other-than-temporary impairment charge was previously recorded | 147 | 278 | ||||||
Balance at end of year | $ | 425 | $ | 278 |
Loans consisted of the following amounts: | December 31, | |||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Commercial real estate | $ | 221,578 | $ | 229,061 | ||||
Residential real estate | 112,680 | 64,299 | ||||||
Home equity | 36,116 | 34,755 | ||||||
Commercial and industrial | 135,250 | 145,012 | ||||||
Consumer | 2,960 | 3,307 | ||||||
Total Loans | 508,584 | 476,434 | ||||||
Unearned premiums and deferred loan fees and costs, net | 742 | 360 | ||||||
Allowance for loan losses | (6,934 | ) | (7,645 | ) | ||||
$ | 502,392 | $ | 469,149 |
At December 31, 2008 two mortgage-backed securities had gross unrealizedtherefore not included in our accompanying consolidated balance sheets. We share ratably with our participating lenders in any gains or losses that may result from a borrower’s lack of 62.9% from Westfield Financial’s amortized cost basis of temporarily impaired debt securities which existed for greater than twelve months. The securities are privately issued collateralized mortgage obligations. Management determined that an orderly and active market for these securities did not exist based on a significant reduction in trading volume and widening spreads during the third quarter of 2008. Westfield Financial’s internal model estimates expected future cash flows discounted using a rate management believes is representative of current market conditions. Factors in determining the discount rate include the current level of deferrals and/or defaults, changes in credit rating and the financial condition of the debtors within the underlying securities, broker quotes for securitiescompliance with similar structure and credit risk, interest rate movements an d pricing of new issuances. Based upon the above analysis, management believes it is probable that all principal and interest will be collected in accordance with the contractual terms of the securities. Westfield Financial hasloan. We continue to service the intentloans on behalf of the participating lenders and, abilityas such, collect cash payments from the borrowers, remit payments (net of servicing fees) to holdparticipating lenders and disburse required escrow funds to relevant parties. At December 31, 2010 and 2009, we serviced loans for participants aggregating $5.2 million and $5.4 million, respectively.
An analysis of changes in the allowance for loan losses is as follows: | ||||||||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Balance, beginning of year | $ | 7,645 | $ | 8,796 | $ | 5,726 | ||||||
Provision | 8,923 | 3,900 | 3,453 | |||||||||
Charge-offs | (9,717 | ) | (5,099 | ) | (449 | ) | ||||||
Recoveries | 83 | 48 | 66 | |||||||||
Balance, end of year | $ | 6,934 | $ | 7,645 | $ | 8,796 |
2010 follows:
Residential Real Estate | Commercial Real Estate | Commercial and Industrial | Consumer | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Amount of allowance for loan losses for loans deemed to be impaired | $ | - | $ | - | $ | 19 | $ | - | $ | 19 | ||||||||||
Amount of allowance for loan losses not deemed to be impaired | 877 | 3,182 | 2,830 | 26 | 6,915 | |||||||||||||||
Loans deemed to be impaired | 125 | 1,891 | 539 | - | 2,555 | |||||||||||||||
Loans not deemed to be impaired | 148,671 | 219,687 | 134,711 | 2,960 | 506,029 |
4.
LOANS
Loans consisted of the following amounts:
|
|
|
|
| December 31, | ||
|
|
|
|
| 2008 |
| 2007 |
|
|
|
|
| (In thousands) | ||
|
|
|
|
|
|
|
|
Commercial real estate |
|
| $ 223,857 |
| $ 189,964 | ||
Residential real estate |
|
| 62,810 |
| 72,170 | ||
Home equity |
|
|
|
| 35,562 |
| 35,940 |
Commercial and industrial |
|
| 153,861 |
| 116,514 | ||
Consumer |
|
|
|
| 4,248 |
| 5,479 |
Total loans |
|
|
|
| 480,338 |
| 420,067 |
Unearned premiums and deferred loan fees and costs, net | 593 |
| 561 | ||||
Allowance for loan losses |
|
| (8,796) |
| (5,726) | ||
|
|
|
|
| $ 472,135 |
| $ 414,902 |
30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater than 90 Days Past Due | Total Past Due | Past Due 90 Days or More and Still Accruing | Loans in Non- Accrual | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||
Residential 1-4 family | $ | 196 | $ | 459 | $ | 172 | $ | 827 | $ | - | $ | 629 | ||||||||||||
Home equity | 121 | - | 138 | 259 | - | 144 | ||||||||||||||||||
Commercial real estate | 14,797 | - | 919 | 15,716 | - | 1,891 | ||||||||||||||||||
Commercial and industrial | 204 | 1,000 | 150 | 1,354 | - | 539 | ||||||||||||||||||
Consumer | 7 | - | - | 7 | - | 1 | ||||||||||||||||||
Total | $ | 15,325 | $ | 1,459 | $ | 1,379 | $ | 18,163 | $ | - | $ | 3,204 |
December 31, 2010 | ||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | ||||||||||
(In thousands) | ||||||||||||
Impaired loans without a valuation allowance: | ||||||||||||
Residential real estate | $ | 125 | $ | 127 | $ | - | ||||||
Commercial real estate | 1,891 | 1,939 | - | |||||||||
Commercial and Industrial | 389 | 1,374 | - | |||||||||
Total | 2,405 | 3,440 | - | |||||||||
Impaired loans with a valuation allowance: | ||||||||||||
Commercial and Industrial | 150 | 150 | 19 | |||||||||
Total impaired loans | $ | 2,555 | $ | 3,590 | $ | 19 |
loans at December 31, 2009.
| Years Ended December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
|
|
|
|
Impaired loans without a valuation allowance | $ 753 |
| $ 196 |
Impaired loans with a valuation allowance | 7,095 |
| - |
Total impaired loans | $ 7,848 |
| $ 196 |
|
|
|
|
Valuation allowance related to impaired loans | $ 2,286 |
| $ - |
|
|
|
|
Impaired loans in nonaccrual status | $ 7,848 |
| $ 196 |
December 31, | ||||
2009 | ||||
(In thousands) | ||||
Impaired loans without a valuation allowance | $ | 192 | ||
Impaired loans with a valuation allowance | 4,450 | |||
Total impaired loans | $ | 4,642 | ||
Valuation allowance related to impaired loans | $ | 875 | ||
Impaired loans in nonaccrual status | $ | 4,642 |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Average recorded investment in impaired loans | $ | 3,378 | $ | 4,875 | $ | 2,134 | ||||||
Income recorded on cash basis during the period for impaired loans | - | - | - |
| Years Ended | ||||
| December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (Dollars in Thousands) | ||||
|
|
|
|
|
|
Average recorded investment in impaired loans | $ 1,717 |
| $ 119 |
| $ 490 |
Income recorded on cash basis during the period for | - |
| 28 |
| 300 |
impaired loans |
|
|
|
|
|
There were no restructured loans during the years ended December 31, 2008, 2007 and 2006.
F-21
Nonaccrual loans at December 31, 2008, 2007 and 2006 and related interest income are summarized as follows:
| At of For the Years Ended | ||||
| December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
Nonaccrual loans | $ 8,805 |
| $ 1,202 |
| $ 1,028 |
Interest income that would have been recorded under the |
|
|
|
|
|
original contract terms | 200 |
| 65 |
| 67 |
An analysis
part of our annual review process.
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
Balance, beginning of year | $ 5,726 |
| $ 5,437 |
| $ 5,422 |
Provision | 3,453 |
| 400 |
| 390 |
Charge-offs | (449) |
| (317) |
| (584) |
Recoveries | 66 |
| 206 |
| 209 |
|
|
|
|
|
|
Balance, end of year | $ 8,796 |
| $ 5,726 |
| $ 5,437 |
Commercial Real Estate | Commercial and Industrial | |||||||
Loans rated 1 – 3 | $ | 174,137 | $ | 83,650 | ||||
Loans rated 4 | 24,149 | 32,723 | ||||||
Loans rated 5 | 3,164 | 7,424 | ||||||
Loans rated 6 | 20,128 | 11,453 | ||||||
Loans rated 7 | - | - | ||||||
$ | 221,578 | $ | 135,250 |
5.
|
| Years Ended |
|
|
| December 31, |
|
| 2008 |
| 2007 |
|
| (In thousands) |
|
|
|
|
|
Land | $ 1,826 |
| $ 1,826 |
Buildings | 11,769 |
| 11,751 |
Leasehold improvements | 1,435 |
| 1,435 |
Furniture and equipment | 7,629 |
| 7,173 |
Construction in process | 90 |
| 28 |
Total | 22,749 |
| 22,213 |
|
|
|
|
Accumulated depreciation and amortization | (10,683) |
| (9,501) |
|
|
|
|
|
|
|
|
Premises and equipment, net | $ 12,066 |
| $ 12,712 |
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Land | $ | 1,826 | $ | 1,826 | ||||
Buildings | 12,572 | 12,393 | ||||||
Leasehold improvements | 1,435 | 1,435 | ||||||
Furniture and equipment | 8,947 | 8,462 | ||||||
Construction in process | - | 2 | ||||||
Total | 24,780 | 24,118 | ||||||
Accumulated depreciation and amortization | (13,177 | ) | (11,916 | ) | ||||
Premises and equipment, net | $ | 11,603 | $ | 12,202 |
6.
| At December 31, | ||||||||
| 2008 |
| 2007 | ||||||
| Amount |
| Rate |
| Amount |
| Rate | ||
| (Dollars in thousands) | ||||||||
Demand and NOW: |
|
|
|
|
|
|
|
|
|
NOW accounts | $ 83,788 |
| 1.17 | % |
| $ 85,316 |
| 1.62 | % |
Demand deposits | 50,860 |
| - |
|
| 42,408 |
| - |
|
|
|
|
|
|
|
|
|
|
|
Savings: |
|
|
|
|
|
|
|
|
|
Regular accounts | 68,085 |
| 1.05 |
|
| 47,072 |
| 1.24 |
|
Money market accounts | 57,655 |
| 0.94 |
|
| 74,601 |
| 1.24 |
|
|
|
|
|
|
|
|
|
|
|
Time certificates of deposit | 327,641 |
| 3.43 |
|
| 353,279 |
| 4.44 |
|
|
|
|
|
|
|
|
|
|
|
Total deposits | $ 588,029 |
| 2.29 | % |
| $ 602,676 |
| 3.08 | % |
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Amount | Rate | Amount | Rate | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Demand and NOW: | ||||||||||||||||
NOW accounts | $ | 83,621 | 1.08 | % | $ | 70,462 | 1.42 | % | ||||||||
Demand deposits | 85,217 | - | 80,110 | - | ||||||||||||
Savings: | ||||||||||||||||
Regular accounts | 101,333 | 0.62 | 104,650 | 0.88 | ||||||||||||
Money market accounts | 76,184 | 0.57 | 50,120 | 0.74 | ||||||||||||
Time certificates of deposit | 353,980 | 1.98 | 342,633 | 2.49 | ||||||||||||
Total deposits | $ | 700,335 | 1.28 | % | $ | 647,975 | 1.65 | % |
Cash paid for interest on deposits and borrowings was:
|
| Years Ended December 31, | ||||
|
| 2008 |
| 2007 |
| 2006 |
|
| (In thousands) | ||||
|
|
|
|
|
|
|
Deposits |
| $ 15,141 |
| $ 19,429 |
| $ 17,249 |
Short-term borrowings |
| 928 |
| 720 |
| 581 |
Long-term debt |
| 6,075 |
| 2,892 |
| 1,642 |
|
| $ 22,144 |
| $ 23,041 |
| $ 19,472 |
2009 |
| $ 245,939 |
2010 |
| 51,244 |
2011 |
| 27,383 |
2012 |
| 2,637 |
2013 |
| 438 |
|
| $ 327,641 |
Year Ending December 31, | Amount | |||
(In thousands) | ||||
2011 | $ | 236,926 | ||
2012 | 31,356 | |||
2013 | 41,226 | |||
2014 | 36,540 | |||
2015 | 7,932 | |||
$ | 353,980 |
|
| Years Ended December 31, | ||||
|
| 2008 |
| 2007 |
| 2006 |
|
| (In thousands) | ||||
|
|
|
|
|
|
|
Savings |
| $ 748 |
| $ 329 |
| $ 226 |
Money market |
| 763 |
| 1,301 |
| 1,684 |
Time |
| 12,417 |
| 16,574 |
| 14,450 |
Other interest bearing |
| 1,205 |
| 1,340 |
| 908 |
|
| $ 15,133 |
| $ 19,544 |
| $ 17,268 |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Savings | $ | 823 | $ | 955 | $ | 748 | ||||||
Money market | 358 | 467 | 763 | |||||||||
Time | 7,735 | 10,034 | 12,417 | |||||||||
Other interest-bearing | 934 | 1,238 | 1,205 | |||||||||
$ | 9,850 | $ | 12,694 | $ | 15,133 |
7.
Federal Home Loan Bank
Westfield Financial has
2009, there were no advances outstanding under this line.
Federal Home Loan Bank
Years Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Balance outstanding, end of year | $ | 12,336 | $ | 16,499 | ||||
Maximum amount outstanding at any month end during year | 20,321 | 25,834 | ||||||
Average amount outstanding during year | 14,459 | 22,835 | ||||||
Weighted average interest rate, end of year | 0.40 | % | 1.29 | % | ||||
Amortized cost of collateral pledged, end of year (1) | 30,787 | 37,640 | ||||||
Fair value of collateral pledged, end of year (1) | 32,086 | 39,376 |
(1)Includes collateral pledged toward $5.0 million in long-term customer repurchase agreements. |
| Years Ended | ||
| 2008 |
| 2007 |
| (Dollars in thousands) | ||
|
|
|
|
Balance outstanding, end of year | $ 21,274 |
| $ 16,824 |
Maximum amount outstanding at any month end during year | 21,693 |
| 23,619 |
Average amount outstanding during year | 18,079 |
| 19,967 |
Weighted average interest rate, end of year | 1.40% |
| 2.65% |
Amortized cost of collateral pledged, end of year | 35,317 |
| 44,477 |
Fair value of collateral pledged, end of year | 37,338 |
| 45,299 |
Westfield Financial‘s
Our repurchase agreements are collateralized by government-sponsored enterprises and certain mortgage-backed securities. The weighted average interest rate on the pledged collateral was 4.60% and 4.92% at December 31, 2010 and 2009, respectively. |
2010, 2009, and 2008, respectively.
8.
Federal Home Loan Bank
Weighted Average | ||||||||||||||||
Amount | Rate | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands) | ||||||||||||||||
Fixed rate advances maturing: | ||||||||||||||||
2010 | $ | 5,150 | $ | 25,000 | 1.7 | % | 2.6 | % | ||||||||
2011 | 34,605 | 21,650 | 2.0 | 2.1 | ||||||||||||
2012 | 31,650 | 39,150 | 2.5 | 3.6 | ||||||||||||
2013 | 29,887 | 16,650 | 3.0 | 3.1 | ||||||||||||
2014 | 27,000 | 15,000 | 3.6 | 3.8 | ||||||||||||
2015 | 14,000 | 10,000 | 2.7 | 3.8 | ||||||||||||
142,292 | 127,450 | 2.7 | 3.1 | |||||||||||||
Variable rate advances maturing: | ||||||||||||||||
2015 | 9,336 | - | 2.4 | - | ||||||||||||
Total advances | $ | 151,628 | $ | 127,450 | 2.7 | % | 3.1 | % |
| Amount |
| Weighted Average | ||||||||
| 2008 |
| 2007 |
| 2008 |
| 2007 | ||||
Year of Maturity | (Dollars in thousands) | ||||||||||
|
|
|
|
|
|
|
|
|
| ||
2008 | $ - |
| $ 20,000 |
| - | % |
| 4.7 | % | ||
2009 | 45,000 |
| 30,000 |
| 4.2 |
|
| 4.8 |
| ||
2010 | 40,000 |
| 30,000 |
| 4.3 |
|
| 4.5 |
| ||
2011 | 5,000 |
| - |
| 3.5 |
|
| - |
| ||
2012 | 20,000 |
| 20,000 |
| 4.6 |
|
| 4.6 |
| ||
2014 | 5,000 |
| 5,000 |
| 5.0 |
|
| 5.0 |
| ||
Total advances | $ 115,000 |
| $ 105,000 |
| 4.3 | % |
| 4.7 | % |
2010.
F-25
Weighted Average | ||||||||||||||||
Amount | Rate | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands) | ||||||||||||||||
Fixed rate advances maturing: | ||||||||||||||||
2013 | $ | 14,800 | $ | 14,800 | 2.5 | % | 2.5 | % | ||||||||
2014 | 28,000 | 28,000 | 3.1 | 3.1 | ||||||||||||
2018 | 29,500 | 29,500 | 2.9 | 2.9 | ||||||||||||
72,300 | 72,300 | 2.9 | 2.9 | |||||||||||||
Variable rate advances maturing: | ||||||||||||||||
2018 | 9,000 | 9,000 | 3.8 | 1.9 | ||||||||||||
Total advances | $ | 81,300 | $ | 81,300 | 3.0 | % | 2.8 | % |
| Amount Due |
| Weighted | |
Year of Maturity | (Dollars in thousands) | |||
|
|
|
|
|
2013 | $ 9,800 |
| 2.4 | % |
2018 | 48,500 |
| 2.7 |
|
|
|
|
|
|
Total advances | $ 58,300 |
| 2.6 | % |
At December 31, 2010, we had $48.3 million in callable securities sold under agreements to repurchase. At December 31, 2010, the years in which securities sold under agreements to repurchase are callable are as follows: |
Westfield Financial had no securities sold under agreements to repurchase at
Weighted Average | ||||||||
Amount | Rate | |||||||
(In thousands) | ||||||||
2011 | $ | 38,300 | 2.9 | % | ||||
2012 | 10,000 | 3.1 | ||||||
$ | 48,300 | 2.9 | % |
At December 31,2010, 2009, and 2008, Westfield Financial had $58.3 million in callable securities sold under agreements to repurchase. At December 31, 2008, the years in which securities sold under agreements to repurchase are callable are as follows:
respectively.
|
| (In thousands) |
2009 |
| $ 10,000 |
2010 |
| 28,800 |
2011 |
| 9,500 |
2012 |
| 10,000 |
|
| $ 58,300 |
F-26
9.
| |||||
| |||||
| |||||
|
|
| |||
|
|
| |||
|
|
| |||
|
|
| |||
|
|
| |||
| |||||
|
|
| |||
|
|
| |||
|
|
| |||
|
|
| |||
|
|
|
No stock options were granted
Years Ended December 31, | ||||||
2010 | 2009 | |||||
Expected dividend yield | 7.04 | % | 6.35 | % | ||
Expected volatility | 35.83 | % | 36.09 | % | ||
Risk-free interest rate | 2.48 | % | 2.78 | % | ||
Expected life | 10 years | 10 years | ||||
No stock options were granted during the year ended December 31, 2008. |
effect at the time of grant. The expected term is based on historical exercise. The dividend yield assumption is based on our history and expectation of dividend payouts.
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
(In years) | (In thousands) | |||||||||||||||
Outstanding at December 31, 2009 | 2,223,012 | $ | 8.36 | |||||||||||||
Granted | 25,000 | 10.04 | ||||||||||||||
Exercised | (336,527 | ) | 4.39 | |||||||||||||
Outstanding at December 31, 2010 | 1,911,485 | 9.08 | 5.84 | 1,578 | ||||||||||||
Exercisable at December 31, 2010 | 1,271,141 | $ | 8.59 | 5.37 | 1,578 |
| Shares |
| Weighted |
| Weighted |
| Aggregate |
|
|
|
|
| (In years) |
| (In thousands) |
Outstanding at December 31, 2007 | 2,709,333 |
| $ 7.54 |
|
|
|
|
Exercised | (433,110) |
| 4.39 |
|
|
|
|
Outstanding at December 31, 2008 | 2,276,223 |
| 8.15 |
| 6.9 |
| $ 4,950 |
|
|
|
|
|
|
|
|
Exercisable at December 31, 2008 | 1,073,097 |
| $ 6.02 |
| 5.0 |
| $ 4,617 |
F-27
| Shares |
| Weighted |
|
|
|
|
Balance at December 31, 2007 | 582,966 |
| $ 7.54 |
Shares vested | (117,774) |
| 10.00 |
Balance at December 31, 2008 | 465,192 |
| $ 6.92 |
Westfield Financial
Shares | Weighted Average Grant Date Fair Value | |||||||
Balance at December 31, 2009 | 358,573 | $ | 10.00 | |||||
Shares granted | 9,000 | 7.67 | ||||||
Shares vested | (118,961 | ) | 10.00 | |||||
Balance at December 31, 2010 | 248,612 | $ | 9.92 |
2008, respectively.
F-28
Years Ending |
| (In thousands) |
|
|
|
2009 |
| $ 447 |
2010 |
| 447 |
2011 |
| 447 |
2012 |
| 447 |
2013 |
| 447 |
Thereafter |
| 9,268 |
|
|
|
|
| $ 11,503 |
Year Ending | ||||
December 31, | Amount | |||
2011 | $ | 446,782 | ||
2012 | 446,782 | |||
2013 | 446,782 | |||
2014 | 446,782 | |||
2015 | 446,782 | |||
Thereafter | 8,375,176 | |||
$ | 10,609,086 |
Westfield Bank has
2009:
| 2008 |
| 2007 |
|
|
|
|
Allocated | 361,644 |
| 278,861 |
Committed to be allocated | 93,947 |
| 96,182 |
Unallocated | 1,551,466 |
| 1,645,413 |
| 2,007,057 |
| 2,020,456 |
|
|
|
|
2010 | 2009 | |||||||
Allocated | 504,462 | 437,626 | ||||||
Committed to be allocated | 89,039 | 91,493 | ||||||
Unallocated | 1,370,934 | 1,459,973 | ||||||
1,964,435 | 1,989,092 |
F-29
10.
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
Change in benefit obligation: |
|
|
|
|
|
Benefit obligation, beginning of year | $ 10,804 |
| $ 10,103 |
| $ 10,430 |
Service cost | 817 |
| 701 |
| 724 |
Interest | 756 |
| 581 |
| 600 |
Actuarial loss (gain) | 628 |
| (419) |
| (594) |
Benefits paid | (307) |
| (162) |
| (1,057) |
Benefit obligation, end of year | 12,698 |
| 10,804 |
| 10,103 |
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
Fair value of plan assets, beginning of year | 9,504 |
| 8,081 |
| 7,453 |
Actual return (loss) on plan assets | (2,423) |
| 1,049 |
| 1,109 |
Employer contribution | 1,671 |
| 536 |
| 576 |
Benefits paid | (307) |
| (162) |
| (1,057) |
Fair value of plan assets, end of year | 8,445 |
| 9,504 |
| 8,081 |
|
|
|
|
|
|
Funded status and accrued benefit, end of year | $ 4,253 |
| $ 1,300 |
| $ 2,022 |
|
|
|
|
|
|
Accumulated benefit obligation | $ 6,824 |
| $ 5,941 |
| $ 5,188 |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Change in benefit obligation: | ||||||||||||
Benefit obligation, beginning of year | $ | 14,057 | $ | 12,698 | $ | 10,804 | ||||||
Service cost | 930 | 862 | 817 | |||||||||
Interest | 773 | 730 | 756 | |||||||||
Actuarial loss | 1,079 | 26 | 628 | |||||||||
Benefits paid | (648 | ) | (259 | ) | (307 | ) | ||||||
Benefit obligation, end of year | 16,191 | 14,057 | 12,698 | |||||||||
Change in plan assets: | ||||||||||||
Fair value of plan assets, beginning of year | 9,793 | 8,445 | 9,504 | |||||||||
Actual return (loss) on plan assets | 1,205 | 1,607 | (2,423 | ) | ||||||||
Employer contribution | 600 | - | 1,671 | |||||||||
Benefits paid | (648 | ) | (259 | ) | (307 | ) | ||||||
Fair value of plan assets, end of year | 10,950 | 9,793 | 8,445 | |||||||||
Funded status and accrued benefit, end of year | $ | 5,241 | $ | 4,264 | $ | 4,253 | ||||||
Accumulated benefit obligation, end of year | $ | 9,842 | $ | 7,579 | $ | 6,824 |
| December 31, | ||||
| 2008 |
| 2007 | ||
|
|
|
|
|
|
Discount rate | 5.75 | % |
| 6.00 | % |
Rate of compensation increase | 5.00 |
|
| 5.00 |
|
2010 | 2009 | |||||||
Discount rate | 5.50 | % | 5.50 | % | ||||
Rate of compensation increase | 5.00 | 5.00 |
| 2008 |
| 2007 |
| 2006 |
|
| (In thousands) |
| ||||
|
|
|
|
|
|
|
Service cost | $ 817 |
| $ 701 |
| $ 724 |
|
Interest Cost | 756 |
| 581 |
| 600 |
|
Expected return on assets | (887) |
| (646) |
| (596) |
|
Actuarial (gain) loss | (13) |
| (1) |
| 43 |
|
Transition obligation | (45) |
| (12) |
| (12) |
|
|
|
|
|
|
|
|
Net periodic pension cost | $ 628 |
| $ 623 |
| $ 759 |
|
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Service cost | $ | 930 | $ | 862 | $ | 817 | ||||||
Interest cost | 773 | 730 | 756 | |||||||||
Expected return on assets | (783 | ) | (676 | ) | (887 | ) | ||||||
Actuarial loss (gain) | 91 | 137 | (45 | ) | ||||||||
Transition asset amortization | (12 | ) | (12 | ) | (13 | ) | ||||||
Net periodic pension cost | $ | 999 | $ | 1,041 | $ | 628 |
F-30
| Years Ended December 31, | |||||||
| 2008 |
| 2007 |
| 2006 | |||
Weighted average assumptions |
|
|
|
|
|
|
|
|
Discount rate | 6.00 | % |
| 5.75 | % |
| 5.75 | % |
Expected return on plan assets | 8.00 |
|
| 8.00 |
|
| 8.00 |
|
Rate of compensation increase | 5.00 |
|
| 5.00 |
|
| 5.00 |
|
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Discount rate | 5.50 | % | 5.75 | % | 6.00 | % | ||||||
Expected return on plan assets | 8.00 | 8.00 | 8.00 | |||||||||
Rate of compensation increase | 5.00 | 5.00 | 5.00 |
The expected long term rate of return on plan assets is based on prevailing yields of high quality fixed income investments increased by a premium of 3.00% to 5.00% for equity investments. We have not yet determined what we expect to contribute to our pension plan in 2011. |
December 31, 2010 | ||||||||||||||||
Plan Assets | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||
(In thousands) | ||||||||||||||||
Collective funds | $ | 3,004 | $ | 2,043 | $ | - | $ | 5,047 | ||||||||
Equity securities | 3,038 | - | - | 3,038 | ||||||||||||
Mutual funds | 1,608 | - | - | 1,608 | ||||||||||||
Hedge funds | - | - | 786 | 786 | ||||||||||||
Short-term investments | - | 471 | - | 471 | ||||||||||||
$ | 7,650 | $ | 2,514 | $ | 786 | $ | 10,950 |
December 31, 2009 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Collective funds | $ | 2,400 | $ | 1,633 | $ | - | $ | 4,033 | ||||||||
Equity securities | 2,522 | - | - | 2,522 | ||||||||||||
Mutual funds | 1,419 | - | - | 1,419 | ||||||||||||
Hedge funds | - | - | 756 | 756 | ||||||||||||
Short-term investments | - | 1,063 | - | 1,063 | ||||||||||||
$ | 6,341 | $ | 2,696 | $ | 756 | $ | 9,793 |
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Balance at beginning of year | $ | 756 | $ | 659 | ||||
Unrealized appreciation | 30 | 97 | ||||||
Balance at end of year | $ | 786 | $ | 756 |
Westfield Financial’s pension plan asset allocation at December 31, 2008 and 2007 are as follows:
| Percentage of Plan Assets | ||||
Asset Category | 2008 |
| 2007 | ||
|
|
|
|
|
|
Total Bonds | 22.7 | % |
| 17.2 | % |
Total Equity | 43.7 |
|
| 61.3 |
|
Total Other | 28.0 |
|
| 19.2 |
|
Total Money Market | 5.6 |
|
| 2.3 |
|
| 100.0 | % |
| 100.0 | % |
plan. The target allocation mix for the pension plan for 20082010 was an equity-based investment deployment range from 40% to 64% of total portfolio assets. The remainder of the portfolio is allocated to fixed income from 15% to 25% and other investments including global asset allocation and hedge funds from 20% to 30%36%.
The investment objective is to diversify investments across a spectrum of investment types to limit risks from large market swings.
Westfield Financial estimates
Year | Benefit Payments to Participants | ||||
| (In Thousands) | ||||
2009 |
|
| $ 46 |
|
|
2010 |
|
| 676 |
|
|
2011 |
|
| 820 |
|
|
2012 |
|
| 320 |
|
|
2012 |
|
| 959 |
|
|
In Aggregate for 2014 - 2017 |
|
| 2,707 |
|
|
|
|
| $ 5,528 |
|
|
Year | Benefit Payments to Participants | ||||
(In thousands) | |||||
2011 | $ | 1,801 | |||
2012 | 710 | ||||
2013 | 237 | ||||
2014 | 963 | ||||
2015 | 504 | ||||
In aggregate for 2016 – 2020 | 3,265 | ||||
$ | 7,480 |
In 2007, Westfield Financial curtailed its postretirement life insurance benefits2009, and $25,000 for active employee to offset rising compensation costs. The curtailment resulted in a pre-tax gain of $315,000.
the year ended December 31, 2008.
11.
Westfield
| Actual |
| Minimum for Capital |
| Minimum To Be Well | |||||||||
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio | |||
| (Dollars in thousands) | |||||||||||||
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital(to Risk Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | $ 276,857 |
| 42.56 | % |
| $ 52,042 |
| 8.00 | % |
| N/A |
| - |
|
Bank | 226,314 |
| 35.55 |
|
| 50,930 |
| 8.00 |
|
| $ 63,662 |
| 10.00 | % |
Tier 1 Capital (to Risk Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | 268,725 |
| 41.31 |
|
| 26,021 |
| 4.00 |
|
| N/A |
| - |
|
Bank | 219,744 |
| 34.52 |
|
| 25,465 |
| 4.00 |
|
| 38,197 |
| 6.00 |
|
Tier 1 Capital (to Adjusted Total Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | 268,725 |
| 23.97 |
|
| 44,836 |
| 4.00 |
|
| N/A |
| - |
|
Bank | 219,744 |
| 20.51 |
|
| 42,854 |
| 4.00 |
|
| 53,567 |
| 5.00 |
|
Tangible Equity (to Tangible Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | N/A |
| - |
|
| N/A |
| - |
|
| N/A |
| - |
|
Bank | 219,744 |
| 20.51 |
|
| 16,070 |
| 1.50 |
|
| N/A |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital(to Risk Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | $ 290,900 |
| 50.29 | % |
| $ 46,276 |
| 8.00 | % |
| N/A |
| - |
|
Bank | 218,118 |
| 38.76 |
|
| 45,021 |
| 8.00 |
|
| $ 56,277 |
| 10.00 | % |
Tier 1 Capital (to Risk Weighted Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | 285,174 |
| 49.30 |
|
| 23,138 |
| 4.00 |
|
| N/A |
| - |
|
Bank | 212,392 |
| 37.74 |
|
| 22,511 |
| 4.00 |
|
| 33,766 |
| 6.00 |
|
Tier 1 Capital (to Adjusted Total Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | 285,174 |
| 27.48 |
|
| 41,506 |
| 4.00 |
|
| N/A |
| - |
|
Bank | 212,392 |
| 21.95 |
|
| 38,696 |
| 4.00 |
|
| 48,370 |
| 5.00 |
|
Tangible Equity (to Tangible Assets): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated | N/A |
| - |
|
| N/A |
| - |
|
| N/A |
| - |
|
Bank | 212,392 |
| 21.95 |
|
| 14,511 |
| 1.50 |
|
| N/A |
| - |
|
Actual | Minimum for Capital Adequacy Purposes | Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
December 31, 2010 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets): | ||||||||||||||||||||||||
Consolidated | $ | 231,272 | 34.05 | % | $ | 54,339 | 8.00 | % | N/A | - | ||||||||||||||
Bank | 221,643 | 32.69 | 54,238 | 8.00 | $ | 67,797 | 10.00 | % | ||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets): | ||||||||||||||||||||||||
Consolidated | 224,338 | 33.03 | 27,169 | 4.00 | N/A | - | ||||||||||||||||||
Bank | 214,668 | 31.66 | 27,119 | 4.00 | 40,678 | 6.00 | ||||||||||||||||||
Tier 1 Capital (to Adjusted Total Assets): | ||||||||||||||||||||||||
Consolidated | 224,338 | 18.07 | 49,662 | 4.00 | N/A | - | ||||||||||||||||||
Bank | 214,668 | 17.37 | 49,434 | 4.00 | 61,793 | 5.00 | ||||||||||||||||||
Tangible Equity (to Tangible Assets): | ||||||||||||||||||||||||
Consolidated | N/A | - | N/A | - | N/A | - | ||||||||||||||||||
Bank | 214,668 | 17.37 | 24,717 | 2.00 | N/A | - | ||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets): | ||||||||||||||||||||||||
Consolidated | $ | 257,209 | 38.07 | % | $ | 54,052 | 8.00 | % | N/A | |||||||||||||||
Bank | 236,940 | 35.29 | 53,706 | 8.00 | $ | 67,132 | 10.00 | % | ||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets): | ||||||||||||||||||||||||
Consolidated | 249,564 | 36.94 | 27,026 | 4.00 | N/A | - | ||||||||||||||||||
Bank | 230,109 | 34.28 | 26,853 | 4.00 | 40,279 | 6.00 | ||||||||||||||||||
Tier 1 Capital (to Adjusted Total Assets): | ||||||||||||||||||||||||
Consolidated | 249,564 | 20.92 | 47,713 | 4.00 | N/A | - | ||||||||||||||||||
Bank | 230,109 | 19.56 | 47,059 | 4.00 | 58,824 | 5.00 | ||||||||||||||||||
Tangible Equity (to Tangible Assets): | ||||||||||||||||||||||||
Consolidated | N/A | - | N/A | - | N/A | - | ||||||||||||||||||
Bank | 230,109 | 19.56 | 23,530 | 2.00 | N/A | - |
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Consolidated GAAP capital | $ | 221,245 | $ | 247,299 | ||||
Unrealized losses on certain available for sale | ||||||||
securities, net of tax | 3,774 | 913 | ||||||
Unrealized losses on defined benefit pension plan | 1,742 | 1,352 | ||||||
Disallowed deferred tax asset | (2,423 | ) | - | |||||
Tier 1 capital | 224,338 | 249,564 | ||||||
Plus: allowance for loan losses | 6,934 | 7,645 | ||||||
Total regulatory capital | $ | 231,272 | $ | 257,209 |
F-33
Westfield Financial and Westfield Bank
The following is a reconciliation of Westfield Financial’s GAAP capital to regulatory Tier 1 and total capital:
| December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
|
|
|
|
Consolidated GAAP capital | $ 259,919 |
| $ 286,532 |
Unrealized losses (gains) on certain available-for-sale | 6,779 |
| (804) |
Unrealized losses (gains) on defined benefit pension plan | 2,027 |
| (554) |
Tier 1 Capital | 268,725 |
| 285,174 |
|
|
|
|
Plus: Allowance for loan losses | 8,132 |
| 5,726 |
|
|
|
|
Total Regulatory Capital | $ 276,857 |
| $ 290,900 |
12.
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
Current tax provision: |
|
|
|
|
|
Federal | $ 2,774 |
| $ 3,612 |
| $ 1,631 |
State | 119 |
| 384 |
| 148 |
Total | 2,893 |
| 3,996 |
| 1,779 |
|
|
|
|
|
|
Deferred tax (benefit) provision: |
|
|
|
|
|
Federal | (1,153) |
| (136) |
| (257) |
State | 55 |
| (48) |
| 1 |
Total | (1,098) |
| (184) |
| (256) |
|
|
|
|
|
|
Total | $ 1,795 |
| $ 3,812 |
| $ 1,523 |
F-34
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Current tax provision: | ||||||||||||
Federal | $ | 302 | $ | 1,213 | $ | 2,774 | ||||||
State | 121 | 166 | 119 | |||||||||
Total | 423 | 1,379 | 2,893 | |||||||||
Deferred tax (benefit) provision: | ||||||||||||
Federal | (387 | ) | (108 | ) | (1,153 | ) | ||||||
State | (2 | ) | (4 | ) | 55 | |||||||
Total | (389 | ) | (112 | ) | (1,098 | ) | ||||||
Total | $ | 34 | $ | 1,267 | $ | 1,795 |
| Years Ended December 31, | |||||||
| 2008 |
| 2007 |
| 2006 | |||
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate | 34.0 | % |
| 34.0 | % |
| 34.0 | % |
Increase (decrease) resulting from: |
|
|
|
|
|
|
|
|
State taxes, net of federal tax benefit | 1.3 |
|
| 1.8 |
|
| 1.6 |
|
Tax exempt income | (5.8) |
|
| (4.0) |
|
| (8.0) |
|
Bank-owned life insurance | (5.7) |
|
| (3.6) |
|
| (4.7) |
|
Dividends received deduction | (0.1) |
|
| (0.1) |
|
| (0.2) |
|
Other, net | (2.5) |
|
| 2.4 |
|
| 2.0 |
|
|
|
|
|
|
|
|
|
|
Effective tax rate | 21.2 | % |
| 30.5 | % |
| 24.7 | % |
|
|
|
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Statutory federal income tax rate | 34.0 | % | 34.0 | % | 34.0 | % | ||||||
Increase (decrease) resulting from: | ||||||||||||
State taxes, net of federal tax benefit | 2.6 | 1.6 | 1.3 | |||||||||
Tax exempt income | (17.0 | ) | (7.1 | ) | (5.8 | ) | ||||||
Bank-owned life insurance | (17.0 | ) | (7.7 | ) | (5.7 | ) | ||||||
Dividends received deduction | - | - | (0.1 | ) | ||||||||
Other, net | (1.5 | ) | (2.0 | ) | (2.5 | ) | ||||||
Effective tax rate | 1.1 | % | 18.8 | % | 21.2 | % |
| December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
|
| ||
Net unrealized loss (gain) on securities available for sale | $ 4,032 |
| $ (286) |
Defined benefit plan | 1,043 |
| (286) |
Allowance for loan losses | 2,991 |
| 1,947 |
Employee benefit and stock-based compensation plans | 2,060 |
| 2,007 |
Other | 395 |
| 394 |
|
|
|
|
Net deferred tax asset | $ 10,521 |
| $ 3,776 |
A summary
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Net unrealized loss on securities available for sale | $ | 1,968 | $ | 742 | ||||
Defined benefit plan | 896 | 695 | ||||||
Allowance for loan losses | 2,357 | 2,599 | ||||||
Employee benefit and share-based compensation plans | 2,327 | 2,094 | ||||||
Other-than-temporary impairment write-down | 581 | 531 | ||||||
Other | 682 | 334 | ||||||
Net deferred tax asset | $ | 8,811 | $ | 6,995 |
liability of $2.4 million has not been provided.
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
| ||||
Balance at beginning of year | $ 3,776 |
| $ 4,595 |
| $ 4,583 |
Deferred tax benefit | 1,098 |
| 184 |
| 256 |
Net unrealized loss (gain) on securities | 4,318 |
| (757) |
| (204) |
Defined benefit plan | 1,329 |
| (246) |
| (40) |
|
|
|
|
|
|
Balance at end of year | $ 10,521 |
| $ 3,776 |
| $ 4,595 |
F-35
13.
Westfield Financial has
| Years Ended December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
|
|
|
|
Balance, beginning of year | $ 12,893 |
| $ 13,415 |
Principal distributions | 7,457 |
| 3,913 |
Repayments of principal | (4,811) |
| (4,435) |
|
|
|
|
Balance, end of year | $ 15,539 |
| $ 12,893 |
14.
Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Balance, beginning of year | $ | 17,626 | $ | 15,539 | ||||
Principal distributions | 187 | 4,061 | ||||||
Repayments of principal | (2,503 | ) | (1,974 | ) | ||||
Balance, end of year | $ | 15,310 | $ | 17,626 |
Management does
| December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
Commitments to extend credit: |
|
|
|
Unused lines of credit | $ 69,222 |
| $ 61,975 |
Loan commitments | 16,826 |
| 19,163 |
Existing construction loan agreements | 1,079 |
| 8,419 |
Standby letters of credit | 5,946 |
| 7,364 |
Westfield Financial uses
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Commitments to extend credit: | ||||||||
Unused lines of credit | $ | 80,378 | $ | 78,173 | ||||
Loan commitments | 6,637 | 13,482 | ||||||
Existing construction loan agreements | 217 | 882 | ||||||
Standby letters of credit | 3,032 | 3,745 |
F-36
Westfield Financial leases
Years Ending | (In thousands) |
|
|
2009 | $ 524 |
2010 | 509 |
2011 | 505 |
2012 | 409 |
2013 | 400 |
Thereafter | 10,667 |
| $ 13,014 |
Year Ending December 31, | Amount | |||
(In thousands) | ||||
2011 | $ | 565 | ||
2012 | 473 | |||
2013 | 466 | |||
2014 | 463 | |||
2015 | 435 | |||
Thereafter | 10,137 | |||
$ | 12,539 |
15.
F-37
16.
ASSETS AND LIABLITIES
Westfield Financial uses
Fair Value Hierarchy
In accordance with SFAS No. 157, Westfield Financial groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments or mortgage loans held for sale, for which the fair value is based on what the securitization market is currently offering for mortgage loans with similar characteristics.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain asset-backed securities, certain private equity investments, residential mortgage servicing rights, and long-term derivative contracts.
F-38
These securities include government sponsored enterprise obligations, state and municipal obligations, residential mortgage-backed securities guaranteed and sponsored by the U.S. government or an agency thereof, and private label residential mortgage-backed securities. At December 31, 2010, all fair value measurements are obtained from a third-party pricing service and are not adjusted by management.
Long-term debt - The fair values of Westfield Financial’s long-term debt are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.
F-39
| December 31, 2008 | ||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| (In thousands) | ||||||
|
|
|
|
|
|
|
|
Securities available for sale | $ 6,127 |
| $ 18,269 |
| $ - |
| $ 24,396 |
Mortgage-backed securities available |
|
|
|
|
|
|
|
for sale | - |
| 233,747 |
| - |
| 233,747 |
Total assets |
|
|
|
|
|
|
|
| $ 6,127 |
| $ 252,016 |
| $ - |
| $ 258,143 |
December 31, 2010 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Securities available for sale: | (In thousands) | |||||||||||||||
Mutual funds | $ | 5,272 | $ | 1,641 | $ | - | $ | 6,913 | ||||||||
Common and preferred stock | 47 | - | - | 47 | ||||||||||||
Government-sponsored enterprise obligations | - | �� | 17,864 | - | 17,864 | |||||||||||
State and municipal bonds | - | 43,077 | - | 43,077 | ||||||||||||
Government sponsored residential mortgage-backed securities | - | 380,984 | - | 380,984 | ||||||||||||
U.S. government guaranteed residential mortgage-backed securities | - | 187,676 | - | 187,676 | ||||||||||||
Private label residential mortgage-backed securities | - | 7,578 | - | 7,578 | ||||||||||||
Total assets | $ | 5,319 | $ | 638,820 | $ | - | $ | 644,139 |
December 31, 2009 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Mutual funds | $ | 5,037 | $ | 1,452 | $ | - | $ | 6,489 | ||||||||
Common and preferred stock | 59 | - | - | 59 | ||||||||||||
Government-sponsored enterprise obligations | - | 10,698 | - | 10,698 | ||||||||||||
State and municipal | - | 2,070 | - | 2,070 | ||||||||||||
Government-sponsored residential mortgage-backed securities | - | 290,248 | - | 290,248 | ||||||||||||
U.S. government guaranteed residential mortgage-backed securities | - | 1,047 | - | 1,047 | ||||||||||||
Private-label residential mortgage-backed | - | 8,510 | - | 8,510 | ||||||||||||
Total assets | $ | 5,096 | $ | 314,025 | $ | - | $ | 319,121 |
Westfield Financial
2010 and 2009.
| At December 31, 2008 |
| Year Ended | ||||
| (In thousands) | ||||||
|
|
|
|
|
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Gains (Losses) |
|
|
|
|
|
|
|
|
Impaired loans | $ - |
| $ - |
| $ 4,809 |
| $ (2,286) |
Total assets | $ - |
| $ - |
| $ 4,809 |
| $ (2,286) |
At | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||||||
Total | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
(In thousands) | ||||||||||||||||
Impaired loans | $ | - | $ | - | $ | 1,661 | $ | (714 | ) | |||||||
Other real estate owned | - | - | 223 | (157 | ) | |||||||||||
Total assets | $ | - | $ | - | $ | 1,884 | $ | (871 | ) | |||||||
At | Year Ended | |||||||||||||||
December 31, 2009 | December 31, 2009 | |||||||||||||||
Total | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
(In thousands) | ||||||||||||||||
Impaired loans | $ | - | $ | - | $ | 3,575 | $ | (875 | ) | |||||||
Total assets | $ | - | $ | - | $ | 3,575 | $ | (875 | ) |
Westfield Financial does
F-40
| 2008 |
| 2007 | ||||
| Carrying |
| Estimated |
| Carrying |
| Estimated |
| Value |
| Fair Value |
| Value |
| Fair Value |
| (In thousands) | ||||||
Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents | $ 56,533 |
| $ 56,533 |
| $ 37,623 |
| $ 37,623 |
Securities: |
|
|
|
|
|
|
|
Available for sale | 24,396 |
| 24,396 |
| 38,051 |
| 38,051 |
Held to maturity | 79,303 |
| 82,491 |
| 104,025 |
| 105,829 |
|
|
|
|
|
|
|
|
Mortgage backed securities: |
|
|
|
|
|
|
|
Available for sale | 233,747 |
| 233,747 |
| 206,178 |
| 206,178 |
Held to maturity | 168,332 |
| 168,716 |
| 174,594 |
| 174,550 |
Federal Home Loan Bank of Boston |
|
|
|
|
|
|
|
and other stock | 8,456 |
| 8,456 |
| 7,510 |
| 7,510 |
|
|
|
|
|
|
|
|
Loans - net | 472,135 |
| 492,121 |
| 414,902 |
| 432,901 |
|
|
|
|
|
|
|
|
Accrued interest receivable | 5,261 |
| 5,261 |
| 5,761 |
| 5,761 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Deposits | 588,029 |
| 591,244 |
| 602,676 |
| 603,780 |
|
|
|
|
|
|
|
|
Short-term borrowings | 49,824 |
| 49,824 |
| 35,268 |
| 35,268 |
|
|
|
|
|
|
|
|
Long-term debt | 173,300 |
| 177,567 |
| 105,000 |
| 106,063 |
|
|
|
|
|
|
|
|
Accrued interest payable | 762 |
| 762 |
| 602 |
| 602 |
2010 | 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 11,611 | $ | 11,611 | $ | 28,719 | $ | 28,719 | ||||||||
Securities: | ||||||||||||||||
Available for sale | 644,139 | 644,139 | 319,121 | 319,121 | ||||||||||||
Held to maturity | - | - | 295,011 | 303,619 | ||||||||||||
Federal Home Loan Bank of Boston | ||||||||||||||||
and other restricted stock | 12,251 | 12,251 | 10,339 | 10,339 | ||||||||||||
Loans - net | 502,392 | 505,791 | 469,149 | 474,554 | ||||||||||||
Accrued interest receivable | 4,279 | 4,279 | 5,198 | 5,198 | ||||||||||||
Liabilities: | ||||||||||||||||
Deposits | 700,335 | 697,815 | 647,975 | 649,473 | ||||||||||||
Short-term borrowings | 62,937 | 62,936 | 74,499 | 74,499 | ||||||||||||
Long-term debt | 238,151 | 243,800 | 213,845 | 214,669 | ||||||||||||
Accrued interest payable | 720 | 720 | 730 | 730 |
17.
Westfield Financial has
Westfield Financial operates
F-41
18.
| December 31, | ||
| 2008 |
| 2007 |
| (In thousands) | ||
ASSETS: |
|
|
|
Due from banks | $ 2,700 |
| $ 2,691 |
Federal funds sold | 10,518 |
| 10,979 |
Securities held to maturity | 6,885 |
| 6,885 |
Securities available for sale | - |
| 10,163 |
Mortgage-backed securities held to maturity | 9,937 |
| 11,964 |
Mortgage-backed securities available for sale | 13,503 |
| 27,331 |
Investment in subsidiaries | 212,277 |
| 213,574 |
Other assets | 4,227 |
| 3,072 |
TOTAL ASSETS | 260,047 |
| 286,659 |
|
|
|
|
LIABILITIES AND EQUITY: |
|
|
|
Liabilities | 128 |
| 127 |
Equity | 259,919 |
| 286,532 |
TOTAL LIABILITIES AND EQUITY | $ 260,047 |
| $ 286,659 |
December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
ASSETS: | ||||||||
Due from banks | $ | 1,236 | $ | 5,237 | ||||
Federal funds sold | 3 | - | ||||||
Securities held to maturity | - | 1,917 | ||||||
Securities available for sale | 4,544 | 8,130 | ||||||
Investment in subsidiaries | 210,886 | 227,680 | ||||||
Other assets | 4,633 | 4,371 | ||||||
TOTAL ASSETS | 221,302 | 247,335 | ||||||
LIABILITIES AND EQUITY: | ||||||||
Liabilities | 57 | 36 | ||||||
Equity | 221,245 | 247,299 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 221,302 | $ | 247,335 |
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
|
|
|
|
|
|
INTEREST AND DIVIDEND INCOME: |
|
|
|
|
|
Securities | $ 2,231 |
| $ 2,605 |
| $ 248 |
Federal funds sold | 290 |
| 1,559 |
| 40 |
Gain on sale of securities, net | 303 |
| - |
| - |
Other income | 9 |
| 9 |
| 6 |
Total interest income | 2,833 |
| 4,173 |
| 294 |
|
|
|
|
|
|
NONINTEREST EXPENSE: |
|
|
|
|
|
Salaries and employee benefits | 2,857 |
| 2,200 |
| 1,331 |
Other | 491 |
| 493 |
| 160 |
Total noninterest expense | 3,348 |
| 2,693 |
| 1,491 |
|
|
|
|
|
|
INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED |
|
|
|
|
|
INCOME OF SUBSIDIARIES AND INCOME TAXES | (515) |
| 1,480 |
| (1,197) |
|
|
|
|
|
|
EQUITY IN UNDISTRIBUTED INCOME OF |
|
|
|
|
|
SUBSIDIARIES | 7,144 |
| 7,882 |
| 5,434 |
|
|
|
|
|
|
INCOME TAX PROVISION (BENEFIT) | (62) |
| 662 |
| (417) |
|
|
|
|
|
|
NET INCOME | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
INCOME (LOSS): | ||||||||||||
Dividends from subsidiaries | $ | 19,500 | $ | 9,078 | $ | - | ||||||
Interest income from securities | 247 | 1,499 | 2,231 | |||||||||
Interest income from federal funds sold | - | 4 | 290 | |||||||||
(Loss) gain on sale of securities, net | (22 | ) | (2,079 | ) | 303 | |||||||
Other income | 2 | 6 | 9 | |||||||||
Total income | 19,727 | 8,508 | 2,833 | |||||||||
OPERATING EXPENSE: | ||||||||||||
Salaries and employee benefits | 2,710 | 3,100 | 2,857 | |||||||||
Other | 426 | 470 | 491 | |||||||||
Total operating expense | 3,136 | 3,570 | 3,348 | |||||||||
INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED | ||||||||||||
INCOME OF SUBSIDIARIES AND INCOME TAXES | 16,591 | 4,938 | (515 | ) | ||||||||
EQUITY IN UNDISTRIBUTED (LOSS) INCOME OF | ||||||||||||
SUBSIDIARIES | (13,600 | ) | (767 | ) | 7,144 | |||||||
NET INCOME BEFORE TAXES | 2,991 | 4,171 | 6,629 | |||||||||
INCOME TAX BENEFIT | (15 | ) | (1,288 | ) | (62 | ) | ||||||
NET INCOME | $ | 3,006 | $ | 5,459 | $ | 6,691 |
| Years Ended December 31, | ||||
| 2008 |
| 2007 |
| 2006 |
| (In thousands) | ||||
OPERATING ACTIVITIES: |
|
|
|
|
|
Net Income | $ 6,691 |
| $ 8,700 |
| $ 4,654 |
Equity in undistributed earnings of subsidiaries | (7,144) |
| (7,882) |
| (5,434) |
Net amortization of premiums and discounts on securities | 10 |
| 21 |
| 12 |
Net realized securities gains | (303) |
| - |
| - |
Change in other liabilities | 1 |
| 55 |
| (42) |
Change in other assets | 414 |
| (1,565) |
| (535) |
Net transfers from subsidiaries | - |
| - |
| 236 |
Other, net | 2,327 |
| 2,780 |
| 2,074 |
|
|
|
|
|
|
Net cash provided by operating activities | 1,996 |
| 2,109 |
| 965 |
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of securities | - |
| (58,179) |
| - |
Proceeds from principal collections | 5,331 |
| 4,395 |
| 530 |
Transfer of stock offering proceeds to subsidiaries | - |
| (90,797) |
| - |
Sale of securities | 18,414 |
| - |
| - |
|
|
|
|
|
|
Net cash provided (used) by investing activities | 23,745 |
| (144,581) |
| 530 |
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
Cash dividends paid | (17,945) |
| (12,075) |
| (3,785) |
Purchase of common stock for equity incentive plan | - |
| (6,075) |
| - |
Capital contribution pursuant to dissolution of MHC | - |
| 2,713 |
| - |
Common stock repurchased | (10,483) |
| - |
| (1,583) |
Net proceeds from sale of common stock | - |
| - |
| 171,712 |
Exchange of common stock pursuant to reorganization | - |
| (320) |
| - |
Excess tax benefit from share-based compensation | 334 |
| 222 |
| 260 |
Issuance of common stock in connection with stock |
|
|
|
|
|
option exercises | 1,901 |
| 42 |
| 563 |
Other, net | - |
| (738) |
| 783 |
|
|
|
|
|
|
Net cash (used) provided by financing activities | (26,193) |
| (16,231) |
| 167,950 |
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND |
|
|
|
|
|
CASH EQUIVALENTS | (452) |
| (158,703) |
| 169,445 |
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
Beginning of year | 13,670 |
| 172,373 |
| 2,928 |
|
|
|
|
|
|
End of year | $ 13,218 |
| $ 13,670 |
| $172,373 |
|
|
|
|
|
|
Transfer of securities to Westfield Bank | $ - |
| $ - |
| $ (10,153) |
F-43
19.
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net Income | $ | 3,006 | $ | 5,459 | $ | 6,691 | ||||||
Undistributed equity in subsidiaries | 13,600 | 767 | (7,144 | ) | ||||||||
Net amortization of premiums and discounts on securities | 14 | 39 | 10 | |||||||||
Net realized securities losses (gains) | 22 | 2,079 | (303 | ) | ||||||||
Change in other liabilities | 21 | (92 | ) | 1 | ||||||||
Change in other assets | 367 | (789 | ) | 414 | ||||||||
Other, net | 2,110 | 2,610 | 2,327 | |||||||||
Net cash provided by operating activities | 19,140 | 10,073 | 1,996 | |||||||||
INVESTING ACTIVITIES: | ||||||||||||
Purchase of securities | - | (5,276 | ) | - | ||||||||
Proceeds from principal collections | 1,160 | 10,509 | 5,331 | |||||||||
Sale of securities | 4,264 | 4,394 | 18,414 | |||||||||
Net cash provided by investing activities | 5,424 | 9,627 | 23,745 | |||||||||
FINANCING ACTIVITIES: | ||||||||||||
Cash dividends paid | (14,295 | ) | (14,595 | ) | (17,945 | ) | ||||||
Common stock repurchased | (16,127 | ) | (13,690 | ) | (10,483 | ) | ||||||
Excess tax benefit from share-based compensation | 383 | 155 | 334 | |||||||||
Issuance of common stock in connection with stock | ||||||||||||
option exercises | 1,477 | 449 | 1,901 | |||||||||
Net cash used in financing activities | (28,562 | ) | (27,681 | ) | (26,193 | ) | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (3,998 | ) | (7,981 | ) | (452 | ) | ||||||
CASH AND CASH EQUIVALENTS: | ||||||||||||
Beginning of year | 5,237 | 13,218 | 13,670 | |||||||||
End of year | $ | 1,239 | $ | 5,237 | $ | 13,218 |
20.
| 2008 | ||||||
| First Quarter |
| Second |
| Third |
| Fourth |
| (Dollars in thousands, except per share amounts) | ||||||
|
|
|
|
|
|
|
|
Interest and dividend income | $ 13,769 |
| $ 13,547 |
| $ 13,504 |
| $ 13,236 |
Interest expense | 6,061 |
| 5,594 |
| 5,405 |
| 5,244 |
|
|
|
|
|
|
|
|
Net interest and dividend income | 7,708 |
| 7,953 |
| 8,099 |
| 7,992 |
|
|
|
|
|
|
|
|
Provision for loan losses (1) | 175 |
| 240 |
| 275 |
| 2,763 |
Noninterest income | 875 |
| 932 |
| 964 |
| 954 |
Gain on sales of securities, net | 300 |
| 19 |
| 486 |
| 273 |
Other than temporary impairment of securities | (310) |
| - |
| (651) |
| (322) |
Noninterest expense | 5,784 |
| 5,733 |
| 5,783 |
| 6,033 |
|
|
|
|
|
|
|
|
Income before income taxes | 2,614 |
| 2,931 |
| 2,840 |
| 101 |
|
|
|
|
|
|
|
|
Income taxes | 753 |
| 811 |
| 793 |
| (562) |
|
|
|
|
|
|
|
|
Net income | $ 1,861 |
| $ 2,120 |
| $ 2,047 |
| $ 663 |
|
|
|
|
|
|
|
|
Basic earnings per share | $ 0.06 |
| $ 0.07 |
| $ 0.07 |
| $ 0.03 |
|
|
|
|
|
|
|
|
Diluted earnings per share | $ 0.06 |
| $ 0.07 |
| $ 0.07 |
| $ 0.03 |
|
|
|
|
|
|
|
|
| 2007 | ||||||
| First Quarter |
| Second |
| Third Quarter |
| Fourth |
| (Dollars in thousands, except per share amounts) | ||||||
|
|
|
|
|
|
|
|
Interest and dividend income | $ 12,844 |
| $ 13,059 |
| $ 13,752 |
| $ 13,929 |
Interest expense | 5,323 |
| 5,646 |
| 6,173 |
| 6,266 |
|
|
|
|
|
|
|
|
Net interest and dividend income | 7,521 |
| 7,413 |
| 7,579 |
| 7,663 |
|
|
|
|
|
|
|
|
Provision for loan losses | 100 |
| 75 |
| 50 |
| 175 |
Noninterest income | 819 |
| 974 |
| 964 |
| 943 |
Loss on sales of premises and |
|
|
|
|
|
|
|
equipment, net | - |
| - |
| - |
| 546 |
Curtailment of defined benefit life insurance plan | - |
| - |
| - |
| 315 |
Noninterest expense | 5,306 |
| 5,581 |
| 5,351 |
| 5,587 |
|
|
|
|
|
|
|
|
Income before income taxes | 2,934 |
| 2,731 |
| 3,142 |
| 3,705 |
|
|
|
|
|
|
|
|
Income taxes | 913 |
| 826 |
| 970 |
| 1,103 |
|
|
|
|
|
|
|
|
Net income | $ 2,021 |
| $ 1,905 |
| $ 2,172 |
| $ 2,602 |
|
|
|
|
|
|
|
|
Basic earnings per share | $ 0.07 |
| $ 0.06 |
| $ 0.07 |
| $ 0.09 |
|
|
|
|
|
|
|
|
Diluted earnings per share | $ 0.07 |
| $ 0.06 |
| $ 0.07 |
| $ 0.09 |
(1) The fourth quarter provision for loan losses includes a specific valuation allowance of $1.9 million relating to a single commercial loan relationship deemed to be impaired.
2010 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Interest and dividend income | $ | 11,955 | $ | 11,595 | $ | 11,550 | $ | 11,047 | ||||||||
Interest expense | 4,264 | 4,171 | 4,201 | 4,129 | ||||||||||||
Net interest and dividend income | 7,691 | 7,424 | 7,349 | 6,918 | ||||||||||||
Provision for loan losses | 500 | 4,120 | 3,928 | 375 | ||||||||||||
Noninterest income | 867 | 878 | 836 | 883 | ||||||||||||
Total other-than-temporary impairment losses in securities | (1,071 | ) | - | - | (490 | ) | ||||||||||
Portion of impairment losses recognized in accumulated other comprehensive loss | 971 | - | - | 443 | ||||||||||||
Net impairment losses recognized in income | (100 | ) | - | - | (47 | ) | ||||||||||
Loss on sales of premises and equipment, net | - | - | - | - | ||||||||||||
Loss on prepayment of borrowings | - | - | - | - | ||||||||||||
Loss on disposal of OREO | 7 | (6 | ) | - | - | |||||||||||
Gain (loss) on sales of securities, net | 186 | 1,132 | 2,609 | 145 | ||||||||||||
Noninterest expense | 6,395 | 5,941 | 6,184 | 6,289 | ||||||||||||
Income before income taxes | 1,756 | (633 | ) | 682 | 1,235 | |||||||||||
Income taxes | 402 | (247 | ) | (17 | ) | (104 | ) | |||||||||
Net income | $ | 1,354 | $ | (386 | ) | $ | 699 | $ | 1,339 | |||||||
Basic earnings per share | $ | 0.05 | $ | (0.01 | ) | $ | 0.03 | $ | 0.04 | |||||||
Diluted earnings per share | $ | 0.05 | $ | (0.01 | ) | $ | 0.03 | $ | 0.04 | |||||||
2009 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Interest and dividend income | $ | 13,102 | $ | 12,975 | $ | 13,298 | $ | 13,155 | ||||||||
Interest expense | 5,084 | 5,169 | 5,056 | 4,713 | ||||||||||||
Net interest and dividend income | 8,018 | 7,806 | 8,242 | 8,442 | ||||||||||||
Provision for loan losses | 1,150 | 590 | 620 | 1,540 | ||||||||||||
Noninterest income | 1,060 | 1,098 | 951 | 967 | ||||||||||||
Total other-than-temporary impairment losses in securities | - | - | (1,343 | ) | (411 | ) | ||||||||||
Portion of impairment losses recognized in accumulated other comprehensive loss | - | - | 1,157 | 319 | ||||||||||||
Net impairment losses recognized in income | - | - | (186 | ) | (92 | ) | ||||||||||
Loss on sales of premises and equipment, net | (8 | ) | - | - | - | |||||||||||
Loss on prepayment of borrowings | - | (142 | ) | - | - | |||||||||||
Loss on disposal of OREO | - | - | (110 | ) | - | |||||||||||
Gain (loss) on sales of securities, net | 87 | 122 | (774 | ) | 182 | |||||||||||
Noninterest expense | 6,408 | 7,007 | 6,064 | 5,558 | ||||||||||||
Income before income taxes | 1,599 | 1,287 | 1,439 | 2,401 | ||||||||||||
Income taxes | 394 | 214 | 197 | 462 | ||||||||||||
Net income | $ | 1,205 | $ | 1,073 | $ | 1,242 | $ | 1,939 | ||||||||
Basic earnings per share | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.07 | ||||||||
Diluted earnings per share | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.06 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Westfield Financial, Inc.
We have audited Westfield Financial, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Westfield Financial Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Also, because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), our audit of Westfield Financial, Inc.’s internal control over financial reporting included controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and the Office of Thrift Supervision Instructions for Thrift Financial Reports. A company's internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
F-45
In our opinion, Westfield Financial, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the December 31, 2008 consolidated financial statements of Westfield Financial, Inc. and our report dated March 10, 2009 expressed an unqualified opinion.
Wolf and Company, P.C.
Boston, Massachusetts
March 10, 2009
F-46