WESTBOROUGH, Mass.--(BUSINESS WIRE)--January 31, 2005 --Westborough Financial Services, Inc., (the "Company") (OTCBB: WFSM.OB) the holding company for The Westborough Bank (the "Bank"), reported earnings per share (dilutive) for three-months ended December 31, 2004 of $0.22 on net income of $339 thousand, as compared to $0.22 per share (dilutive) on net income of $349 thousand for three-months ended December 31, 2003. For three-months ended December 31, 2004, net income declined by $10 thousand, or 2.9%, as compared to three-months ended December 31, 2003. The Company's return on average assets was 0.51% for three-months ended December 31, 2004 as compared to 0.54% for three-months ended December 31, 2003 and the Company's return on average stockholders' equity was 4.70% for three-months ended December 31, 2004 as compared to 4.82% for three-months ended December 31, 2003. For three-months ended December 31, 2004, net income declined by $10 thousand as compared to three-months ended December 31, 2003 primarily due to an increase in operating expenses and declines in net interest income and other income, offset, to a lesser extent, by a credit provision for loan losses and a decrease in income taxes. Operating expenses increased by $111 thousand, or 5.8%, to $2.0 million for three-months ended December 31, 2004 as compared to $1.9 million for three-months ended December 31, 2003 primarily due higher general and administrative costs associated with director retainer fees, costs associated with internal/external vulnerability testing of our computer networks and expenses related to the audit of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. As it relates to the Sarbanes-Oxley Act of 2002, management believes increased costs associated with compliance will have a material effect upon th e level of operating expenses and, accordingly, the level of future net income. Operating expenses were also affected by higher marketing costs associated with cable TV and newspaper advertising and salary costs associated with a fee paid to a search agency for the hiring of a new controller. Operating expenses as a percent of average assets were 3.03% for three-months ended December 31, 2004 as compared to 2.98% for three-months ended December 31, 2003. Other income declined by $27 thousand, or 10.8%, to $223 thousand for three-months ended December 31, 2004 as compared to $250 thousand for three-months ended December 31, 2003 primarily due to a decline in the level of commercial loan prepayment fees, offset, to a lesser extent by an increase in fees associated with the sale of non-deposit investment products. Net interest income declined by $37 thousand, or 1.7%, to $2.2 million for three-months ended December 31, 2004, as compared to three-months ended December 31, 2003. The average rate earned on interes t-earning assets declined by 0.14%, to 4.81% for three-months ended December 31, 2004 from 4.95% for three-months ended December 31, 2003, and the average cost of interest-bearing liabilities increased by 0.07%, to 1.54% for three-months ended December 31, 2004 from 1.47% for three-months ended December 31, 2003. As a result, the net interest rate spread, which represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest bearing-liabilities, declined to 3.27% for three-months ended December 31, 2004, as compared to 3.48% for three-months ended December 31, 2003. The decline in the rates of interest earned on interest-earning assets primarily reflects a decline in market interest rates on loans and securities, offset, to a lesser extent by in increase in the rate of interest earned on short-term securities. The increase in average rates of interest paid on interest-bearing liabilities was primarily the result of higher interest rates paid on tiered-rate savings accounts, offset, to a lesser extent by a decline in the average rate of interest paid on borrowing from the Federal Home Loan Bank of Boston. There was a $125 thousand credit provision for loan loss for three-months ended December 31, 2004 as compared to a $30 thousand provision for three-months ended December 31, 2003 and primarily reflects an improvement in the credit quality of specific commercial loans for which a portion of the allowance for loan losses had been allocated. The provision for income taxes declined by $10 thousand, to $157 thousand for three-months ended December 31, 2004, resulting in an effective income tax rate of 31.7%, as compared to an effective income tax rate of 32.4% for three-months ended December 31, 2003. The Company's total assets increased by $6.0 million, or 2.3%, to $270.0 million at December 31, 2004 from $264.0 million at September 30, 2004. While deposits declined by $2.4 million, or 1.1%, to $209.4 million from $211.7 million, short and long-term borrowing from the Federal Home Loan Bank increased by $8.0 million, or 37.2%, to $29.5 million at December 31, 2004 from $21.5 million at September 30, 2004. The increase in borrowing was used primarily to fund loan growth and deposit outflows. Loans, net of allowance for loan losses, increased by $8.1, or 4.9%, to $173.4 million at December 31, 2004 as compared to $165.3 million at September 30, 2004 primarily as a result of net new loan growth in adjustable-rate residential and commercial loans and increases in home equity lines-of-credit. Much of this loan growth was the result of a successful wholesale mortgage broker program and attractive retail |
