Press Release
Westborough Financial Services, Inc. Reports Earnings for Three and
Nine-months Ended June 30, 2004
WESTBOROUGH, Mass.--(BUSINESS WIRE)-July 27, 2004--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 June 30, 2004 of $0.13 on net income of $210
thousand, as compared to $0.15 per share (dilutive) on net income of $227
thousand for three-months ended June 30, 2003. For three-months ended June
30, 2004, net income decreased by $17 thousand, or 7.5%, to $210 thousand,
as compared to $227 thousand, for three-months ended June 30, 2003. The
Company's return on average assets was 0.32% for three-months ended June
30, 2004 as compared to 0.36% for three-months ended June 30, 2003. The
Company also reported earnings per share (dilutive) for nine-months ended
June 30, 2004 of $0.55 on net income of $858 thousand, as compared to $0.44
per share (dilutive) on net income of $684 thousand for nine-months ended
June 30, 2003. For nine-months ended June 30, 2004, net income increased
by $174 thousand, or 25.4%, to $858 thousand, as compared to $684 thousand,
for nine-months ended June 30, 2003. The Company's return on average
assets was 0.45% for nine-months ended June 30, 2004 as compared to 0.37%
for nine-months ended June 30, 2003.
For three-months ended June 30, 2004, net income declined by $17
thousand, or 7.5%, to $210 thousand, as compared to $227 thousand for
three-months ended June 30, 2003 primarily due to a decrease in gains on
sales of securities available for sale, a decrease in gains on sales of
mortgages and an increase in the provision for loan losses, offset, to a
lesser extent, by an increase in net interest income. Gains on sales of
securities available for sale declined by $101 thousand, or 76.5%, to $31
thousand for three-months ended June 30, 2004 as compared to $132 thousand
for three-months ended June 30, 2003 primarily as a result of a decline in
the volume of securities sold. Gains on sales of mortgages declined by $24
thousand for three-months ended June 30, 2004 as a result of a decline in
sales of fixed-rate mortgages. The provision for loan losses increased by
$30 thousand for three-months ended June 30, 2004 and reflects the result
of a $2.6 million net increase in residential loans and a $2.0 million net
increase in commercial loans for three-months ended June 30, 2004. Net
interest income increased by $140 thousand, or 7.1%, to $2.1 million for
three-months ended June 30, 2004 as compared to $2.0 million for three-
months ended June 30, 2003. Interest and dividend income declined by $39
thousand, or 1.4%, to $2.8 million for three-months ended June 30, 2004 as
compared to $2.9 million for three-months ended June 30, 2003.
Alternatively, interest expenses declined by $179 thousand, or 19.6%, to
$734 thousand for three-months ended June 30, 2004 as compared to $913
thousand for three-months ended June 30, 2003. The net interest rate
spread, which reflects the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing
liabilities, increased by 0.13%, to 3.24% for three-months ended June 30,
2004 as compared to 3.11% for three-months ended June 30, 2003. While the
average rate earned on interest-earning assets declined by 0.26%, to 4.65%
for three-months ended June 30, 2004 from 4.91% for three-months ended June
30, 2003, the average cost of interest-bearing liabilities declined by
0.40%, to 1.41% for three-months ended June 30, 2004 from 1.81% for three-
months ended June 30, 2003. The decline in the rates of interest earned on
interest-earning assets primarily reflects a decline in market interest
rates and the desire for loan customers to refinance their loans at lower
interest rates. The decline in rates of interest paid on interest-bearing
liabilities was primarily the result of maturing certificates of deposits
reinvested at lower rates and also due to an increase in the amount of low-
cost borrowing from the Federal Home Loan Bank.
For nine-months ended June 30, 2004, net income increased by $174
thousand, or 25.4%, to $858 thousand, as compared to $684 thousand, for
nine-months ended June 30, 2003 primarily due to an increase in net
interest income, customer service fees and gain on the sales of mortgages,
offset, to a lesser extent, by an increase in operating expenses, provision
for loan losses, provision for income taxes and a decline in gains on the
sales of securities available for sale. Net interest income increased by
$259 thousand, or 4.2%, to $6.4 million for nine-months ended June 30,
2004, as compared to $6.1 million for nine-months ended June 30, 2003.
While the average rate earned on interest-earning assets declined by 0.52%,
to 4.76% for nine-months ended June 30, 2004 from 5.28% for nine-months
ended June 30, 2003, the average cost of interest-bearing liabilities
declined by 0.62%, to 1.43% for nine-months ended June 30, 2004 from 2.05%
for nine-months ended June 30, 2003. The decline in the rates of interest
earned on interest-earning assets primarily reflects a decline in market
interest rates and the desire for loan customers to refinance their loans
at lower interest rates. The decline in rates of interest paid on
interest-bearing liabilities was primarily the result of maturing
certificates of deposits reinvested at lower rates and also due to an
increase in the amount of low-cost borrowing from the Federal Home Loan
Bank. Income from customer service fees increased by $91 thousand, or
20.4%, to $536 thousand for nine-months ended June 30, 2004 as compared to
$445 thousand for nine-months ended June 30, 2003, primarily due to the
recognition of a non-refundable $71 thousand prepayment fee from the
payment in full of a $2.6 million commercial loan. Also for nine-months
ended June 30, 2004, the Company sold fixed-rate
mortgage loans, with servicing retained by the Bank, and recognized a pre-
tax gain on the sale of $88 thousand, as compared to a pre-tax gain of $29
thousand, on a substantially reduced volume of loans sold, for nine-months
ended June 30, 2003. For nine-months ended June 30, 2004, operating
expenses increased by $86 thousand, or 1.5%, to $5.9 million, from $5.8
million for nine-months ended June 30, 2003. The primary reasons for the
increase were due to general increases in staff salaries and also due to a
decline in deferred costs related to the decrease in new mortgage loans.
As a result of a higher level of services provided, data processing
expenses increased by $69 thousand, or 15.5%, to $514 thousand for nine-
months ended June 30, 2004 as compared to $445 thousand for nine-months
ended June 30, 2003. Occupancy and equipment expenses declined due
primarily to a savings associated with the closing of the Shaw's
Supermarket branch in April 2004 and a general decline in depreciation due
to more in-use equipment being fully depreciated. Also, professional fees
declined as a result of a decline in legal expenses. The provision for
loan losses increased by $70 thousand for nine-months ended June 30, 2004
and reflects the result of a $5.5 million net increase in commercial loans
for nine-months ended June 30, 2004. Provision for income taxes increased
as a result of increased income before provision for income taxes.
The Company's total assets increased by $7.1 million, or 2.8%, to
$263.2 million at June 30, 2004 from $256.1 million at September 30, 2003.
While deposits declined by $1.2 million, or 0.6%, to $214.7 million from
$215.9 million, advances from the Federal Home Loan Bank increased by $9.0
million, or 94.7%, to $18.5 million at June 30, 2004 from $9.5 million at
September 30, 2003. The increase in advances was used primarily to fund
purchases of securities available for sale and to fund the maturities of
relatively higher-rate certificates of deposits. Securities available for
sale increased by $4.4 million, or 5.0%, to $92.0 million, at June 30, 2004
as compared to $87.6 million at September 30, 2003. Much of the increase
in securities available for sale was in the categories of federal agency
mortgage-backed securities and bonds. Loans increased by $4.3 million, or
3.0%, to $145.9 million at June 30, 2004 primarily as a result of growth in
commercial loans. Non-performing loans declined to $312 thousand, or 0.21%
of loans at June 30, 2004 as compared to $634 thousand, or 0.45% of total
loans at September 30, 2003. Total stockholders' equity declined by $814
thousand, to $27.9 million at June 30, 2004 from $28.7 million at September
30, 2003 primarily as a result of a decline in the market value of
securities available for sale. Accumulated other comprehensive after-tax
loss at June 30, 2004 was $348 thousand, as compared to after-tax income of
$1.3 million at September 30, 2003. The Company's securities consist
primarily of interest-rate sensitive securities whose market value changes
inversely with changes in market interest rates. Interest rates at June
30, 2004 are generally higher than rates at September 30, 2003 and,
accordingly, the market value of securities available for sale declined.
Deferred income tax benefits associated with this market value decline were
approximately $1.0 million.
Joseph F. MacDonough, President and CEO of the Company, commenting on
the Company's performance remarked: "that the board of directors was
pleased with the continued upward trend of earnings for nine-months ended
June 30, 2004 buoyed by the $5.5 million net increase in commercial loans.
Enhanced electronic bill paying options have recently been introduced as we
constantly strive to expand our product offering menu. Superior customer
service remains our ultimate goal."
The Bank was founded in 1869 as a Massachusetts chartered mutual
savings bank and was reorganized into a two-tiered mutual holding company
structure on February 15, 2000. The Bank is a community and customer-
oriented, full-service financial institution offering traditional deposit
products, residential and commercial real estate mortgage loans, electronic
and Internet-based services as well as consumer and commercial loans.
During April 2004, the Bank closed its full-service branch in the Shaws'
Supermarket located in the town of Shrewsbury and consolidated that
operation into the newly expanded Maple Avenue, Shrewsbury branch. As a
result, the Bank currently operates four full-service banking offices
located in the towns of Westborough, Northborough and Shrewsbury,
Massachusetts. The Bank also operates a non-public, self-contained office
at the Willows, a retirement community located in Westborough. Together,
these offices serve the Bank's primary market area consisting of
Westborough, Northborough, Shrewsbury, Grafton, Southborough and Hopkinton,
Massachusetts.
Statements contained in this news release, which are not historical
facts, are forward-looking statements that are defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
are subject to risk and uncertainties, which could cause actual results to
differ materially from those currently anticipated due to a number of
factors, which include, but are not limited to, factors discussed in the
documents filed by the Company with the Securities and Exchange Commission.
The Company and the Bank do not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by
or on behalf of the Company or the Bank.
For further information contact:
John L. Casagrande
Senior Vice President and Treasurer
Westborough Financial Services, Inc.
100 East Main Street
Westborough, MA 01581
508-366-4111
Westborough Financial Services, Inc. and Subsidiary
Selected Condensed Consolidated Financial and Other Data
at
-------------------------
June 30, September 30,
2004 2003
-------- -------------
Condensed Consolidated Balance Sheet Data ($ in thousands): (unaudited)
<s> <c> <c>
Total assets $263,230 $256,122
Loans, net 145,853 141,557
Investment securities 93,601 88,840
Total deposits 214,710 215,898
Federal Home Loan Bank advances 18,500 9,500
Stockholders' equity 27,904 28,718
Allowance for loan losses 950 911
Non-accrual loans 312 634
Non-performing assets 312 634
Condensed Consolidated Statement of Income Data
($ in thousands, except per share data):
Three-Months Ended Nine-Months Ended
--------------------- ---------------------
06/30/04 06/30/03 06/30/04 06/30/03
-------- -------- -------- --------
(unaudited) (unaudited)
<s> <c> <c> <c> <c>
Total interest and dividend income $2,838 $2,877 $8,556 $9,163
Total interest expense 734 913 2,193 3,059
------ ------ ------ ------
Net interest income 2,104 1,964 6,363 6,104
Provision for loan losses 30 0 70 0
------ ------ ------ ------
Net interest income, after provision for
loan losses 2,074 1,964 6,293 6,104
------ ------ ------ ------
Customer service fees 159 166 536 445
Gain (loss) on sales of securities available
for sale, net 31 132 89 129
Gain (loss) on sales of mortgages 0 24 88 29
Miscellaneous 43 49 141 134
------ ------ ------ ------
Total other income 233 371 854 737
------ ------ ------ ------
Total operating expenses 2,014 2,008 5,907 5,821
------ ------ ------ ------
Income before provision for income taxes 293 327 1,240 1,020
Provision for income taxes 83 100 382 336
------ ------ ------ ------
Net Income $ 210 $ 227 $ 858 $ 684
====== ====== ====== ======
Basic number of weighted average shares
outstanding 1,546,958 1,534,061 1,540,744 1,528,857
Dilutive number of weighted average shares
outstanding 1,567,339 1,555,498 1,561,491 1,548,075
Basic earnings per share $0.14 $0.15 $0.56 $0.45
Dilutive earnings per share $0.13 $0.15 $0.55 $0.44
Dividends declared per share $0.05 $0.05 $0.15 $0.15
Performance Ratios (annualized where applicable)
Three-Months Ended Nine-Months Ended
--------------------- ---------------------
06/30/04 06/30/03 06/30/04 06/30/03
-------- -------- -------- --------
(unaudited) (unaudited)
<s> <c> <c> <c> <c>
Return on average assets 0.32% 0.36% 0.45% 0.37%
Return on average stockholders' equity 2.87% 3.20% 3.94% 3.21%
Dividend payout ratio (1) 37.32% 34.26% 27.30% 33.95%
Average stockholders' equity to average assets 11.17% 11.25% 11.29% 11.39%
Net interest rate spread (2) 3.24% 3.11% 3.33% 3.23%
Net interest margin (3) 3.45% 3.35% 3.54% 3.52%
Operating expenses as a percent of average
assets 3.08% 3.19% 3.07% 3.11%
Average interest-bearing assets to average
interest bearing liabilities 117.42% 115.84% 117.11% 116.31%
Efficiency ratio(4) 87.11% 92.15% 83.83% 87.10%
<FN>
<F1> Dividend payout ratio represents dividends declared per share divided
by dilutive earnings per share.
<F2> 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.
<F3> Net interest margin represents net interest income as a percentage
of average interest-earning assets.
<F4> Efficiency ratio represents total operating expenses divided by the
sum of net interest income, customer service fees and miscellaneous
income.
</FN>
Asset Quality Ratios:
at
-------------------------
June 30, September 30,
2004 2003
-------- -------------
unaudited
<s> <c> <c>
Non-performing loans as a percent of loans 0.21% 0.45%
Non-performing assets as a percent of total assets 0.12% 0.25%
Allowance for loan losses as a percent of total loans
before the allowance for loan losses 0.65% 0.64%
Capital Ratio and other data:
Equity to assets at end of period 10.60% 11.21%
Number of shares outstanding at end of period 1,589,574 1,586,174
Number of:
Full-service offices (1) 4 5
Full-time equivalent employees 71 74
<FN>
<F1> The number of full service offices does not include the branch at the
Willows.
</FN>