Exhibit 99.1
Slide 1
Slide 2
While the votes are being tabulated I would like to take a few minutes and report to you on the performance for the fiscal year end 9/30/03 of WFSI and Westborough Bank. As always, legal counsel has asked me to preface my remarks with this disclaimer concerning forward looking statements, which may be found on Page 1 of Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report.
Slide 3
Turning to the first slide, the consolidated financial statements for the year ended 9/30/03 reflect a decrease in net income of $13,000 (1.3%) to a level of $966,000 as compared to $979,000 for the prior fiscal year. Dilutive earnings per share of $.62 (2003) and $.63 (2002) were essentially flat as well. This slight decrease in net income was primarily the result of a decline in net interest income of $294,000. This was the result of the general decline of interest rates, which fueled the desire of our loan customers to refinance or renegotiate their loans to lower rates. Hundreds of our real estate mortgage loan customers took advantage of the historically low interest rate environment and renegotiated rate reductions on $45.9 million of principal balances.
Slide 4
This second slide shows the decrease in the components of net interest income from $8.5 million to $8.2 million.
Interest and dividend income declined by $1.8 million or 13% to $12.1 million for the year ended September 30, 2003. The decrease in interest and dividend income was mainly the result of a decline in the rate earned on interest earning assets offset, to a lesser extent, by an increase in the volume of interest earning assets. During the year, the Federal Reserve Bank's Federal Open Market Committee, ("FOMC") reduced the target rate for fed funds to 1% the lowest rate in forty years. This declining interest rate environment translated into declining rates earned on loans, investment securities and short-term investments.
Interest expense declined by $1.5 million, or 28%, to $3.9 million for the year ended September 30, 2003 from $5.4 million for the year ended September 30, 2002. Interest expense declined mainly due to a decline in the average rate paid on interest-bearing liabilities offset, to a lesser extent, by an increase in the average volume of interest bearing liabilities. The previously mentioned FOMC interest rate reduction allowed the Company to reduce rates paid on NOW, savings, money market deposit and certificates of deposit accounts.
Slide 5
Just one more comment on net interest margin. This next slide, provided by our friends at RBC Capital, shows our net interest margin by quarter since our reorganization in 2000. As you can see, we have always been above our peers and f/y 2003 was a particularly strong year as the net interest margin was in the top 1/3 of publicly traded thrifts (asset < 1bil) nationwide. One of our challenges going forward will be to maintain this strong net interest margin.
Slide 6
The next slide shows operating expenses
Operating expenses increased by $167 thousand, or 2.2%, to $7.6 million for the year ended September 30, 2003 as compared to $7.4 million for the previous year ended September 30, 2002 primarily as a result of increases in salaries, benefits and occupancy expenses. These expenses were offset, to a lesser extent, by declines in marketing expenses and legal fees.
Slide 7
Once again, we have managed to slow the rate of growth in our operating expenses from 25% for f/y 2000 down to 2.2% for f/y 2003. For our most recent quarter ended December 31, 2003, operating expenses were down 0.2% from the comparative quarter ended December 31, 2002. Our ongoing investment in human resources remains our largest single challenge going forward as we attempt to balance our need for skilled and motivated staff to deliver first class service and support to our customers, with the need to grow earnings. We believe the first begets the second.
Slide 8
Turning to the Balance Sheet, this next slide shows the continued growth of the bank. Total assets increased by $14.8 million or 6.2% to $256.1 million at Sept. 30, 2003 from $241.3 million at September 30, 2002. In the four years since our reorganization in 2000, total assets have grown by $50 million. . . . .a compounded rate of growth of approximately 7 1/2%.
Slide 9
The next slide shows the composition or mix of the balance sheet.
Net loans during this period increased $8.7 million, or 6.5 %, to $141.6 million at September 30, 2003 from $132.9 million at September 30, 2002. The loan increase was primarily due to growth in our one-to-four family residential loan portfolio. Investments increased by $5.7 million, or 6.4%, to $96.5 million at September 30, 2003 as compared to $90.8 million at September 30, 2002 due primarily to the investment of funds provided from deposit growth.
Slide 10
Total deposits increased by $13.8 million, or 6.8%, to $215.9 million at September 30, 2003 from $202.1 million at September 30, 2002. Most of this increase was attributable to increases in variable-rate tiered accounts and regular savings accounts. In the current low interest rate and volatile investment environment, deposit customers preferred to place their deposits in stable accounts that offer higher liquidity. The slide indicates solid consistent growth in deposits during past five years.
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This is seen in the next slide that shows non-certificate (core deposit) accounts increasing by $22.7 million (or 16.3%) to $161.7 million at 9/30/03 compared to $139.0 million at 16.3% 9/30/02, while certificates of deposit decreased 14.1%, to $54.2 million at 9/30/03, from $63.1 million at 9/30/02.
Recently, as the national economy has shown signs of improvement, we are beginning to see some deposit out-flow as investors begin to return to the stock market.
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The bank's capital level remains very strong at 11.21% of assets. That is well above all regulatory capital requirements, which are detailed on Page F26 in our 2003 Annual Report.
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For those of you who haven't seen it, this is our new branch in Shrewsbury.
During the year we completed the construction of this facility at 23 Maple Avenue in Shrewsbury. Our plan is to consolidate our Shrewsbury market into this new 3400 square foot building relocating from 900 square feet of retail space next door at 19 Maple Ave. and from 450 square feet at Shaw's supermarket. The 19 Maple Ave. site has been sub-let and the supermarket branch is scheduled to close in the spring.
Before I open the floor for your questions I have just 4 more slides I would like to share with you.
The first three concern our stock price performance.
Slide 14
This slide tracks the closing price of the stock at six-month intervals as well as its appreciation since our reorganization in 2000.
Slide 15
This next slide graphs the same data on a daily basis through this month.
The price has recently traded as high as $37.50 and closed last night at ____.
Slide 16
This next slide, again provided by RBC Capital, compares our price performance with the SNL Thrift Index, which we closely track and with the broader S&P 500 and NASDAQ Composite, which we have consistently out-performed during the last two years as investors sought stability in a bear market.
Slide 17
And finally, this last slide compares our most recent quarterly earnings (for the quarter ended 12/31/03) with the previous four quarters. Our press release, which was distributed via the business wire at 3:00 p.m. this afternoon, is available at the back of the room.
Briefly, net income was $349,000 ($0.22 diluted earning per share) for the q/e 12/31/03, which was up from the q/e 9/30/03 ($0.18 diluted earnings per share) and up from $278,000 ($0.18 dilutive earnings per share) reported for the quarter ended 12/31/02.
The q/e 12/31/03, 25.5% increase in net income over the comparative q/e 12/31/02 was primarily due to an increase in our net interest margin, coupled with a slight decline in our operating expenses. The Company's return on average assets for the quarter ended December 31, 2003 was .54%, as compared to .45% for the q/e December 31, 2002. The Company's annualized return on average stockholders' equity (ROE) improved to 4.82% for q/e 12/31/2003, compared to 3.91% for q/e December 31,2002.
As a result of deposit out flow the Company's total assets declined $2.1 million, or 0.81%, to $254.1 million at December 31, 2003 from $256.1 million at September 30, 2003. However during the same three-month period, our loan portfolio grew by $1.7 million. Asset quality remained strong, with non-performing assets as a percent of total assets of 0.24% at December 31, 2003 as compared to 0.25% at September 30, 2003.
The Company's capital ratio remained strong at 11.28% of assets at December 31, 2003, up from 11.21% at September 30, 2003.
At this time, I would be happy to answer your questions.