Exhibit 99.1
Press Release
Westborough Financial Services, Inc. Reports a 23% Increase in Earnings for
Fiscal Year Ended September 30, 2004
WESTBOROUGH, Mass.--(BUSINESS WIRE)-November 16, 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 fiscal year ended September 30, 2004 of $0.76 on net income
of $1.2 million, as compared to $0.62 per share (dilutive) on net income of
$966 thousand for fiscal year ended September 30, 2003. For year ended
September 30, 2004, net income increased by $225 thousand, or 23.3%, to
$1.2 million, as compared to $966 thousand, for year ended September 30,
2003. The Company's return on average assets was 0.46% for year ended
September 30, 2004 as compared to 0.38% for year ended September 30, 2003
and the Company's return on average stockholders' equity improved to 4.14%
at September 30, 2004 as compared to 3.39% at September 30, 2003.
For year ended September 30, 2004, net income increased by $225
thousand, or 23.3%, to $1.2 million, as compared to $966 thousand, for year
ended September 30, 2003 primarily due to an increase in net interest
income, customer service fees and gains on the sale of mortgages and
securities available for sale, offset, to a lesser extent, by an increase
in operating expenses and provision for loan losses. Net interest income
increased by $330 thousand, or 4.0%, to $8.5 million for year ended
September 30, 2004, as compared to $8.2 million for year ended September
30, 2003. While the average rate earned on interest-earning assets
declined by 0.42%, to 4.76% for year ended September 30, 2004 from 5.18%
for year ended September 30, 2003, the average cost of interest-bearing
liabilities declined by 0.50%, to 1.44% for year ended September 30, 2004
from 1.94% for year ended September 30, 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. 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 an
increase in the amount of low-cost borrowing from the Federal Home Loan
Bank. The provision for loan losses increased by $70 thousand for year
ended September 30, 2004 and primarily reflects the result of a $6 million
net increase in commercial loans for year ended September 30, 2004 and the
inherent risks associated with commercial lending. Income from customer
service fees increased by $98 thousand, or 17.4%, to $661 thousand for year
ended September 30, 2004 as compared to $563 thousand for year ended
September 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 and due to an increase in fee income from the sale of non-
deposit investment products. Additionally, for year ended September 30,
2004, the Company sold $5.5 million of 30 year fixed-rate mortgage loans,
with servicing retained by the Bank, and recognized a pre-tax gain on such
sales of $100 thousand, as compared to a pre-tax gain of $33 thousand for
year ended September 30, 2003. Also, for year ended September 30, 2004,
the Company sold securities for a net gain on the sale of such securities
of $159 thousand, as compared to a net gain of $121 thousand for year ended
September 30, 2003. Security sales were incurred primarily to fund
increased loan growth. For year ended September 30, 2004, operating
expenses increased by $243 thousand, or 3.2%, to $7.9 million, from $7.6
million for year ended September 30, 2003. Salaries and employee benefits
increased by $256 thousand, or 6.5%, to $4.2 million for year ended
September 30, 2004, from $3.9 million for year ended September 30, 2003.
The primary reasons for the increase were due to general increases in staff
salaries and increased expenses relating to supplemental employee
retirement plans, medical insurance and staff incentive compensation. As a
result of a higher level of services provided, data processing expenses
increased by $57 thousand, or 9.5%, to $660 thousand for year ended
September 30, 2004 as compared to $603 thousand for year ended September
30, 2003. Occupancy and equipment expenses declined by $71 thousand, or
5.5%, to $1.2 million for year ended September 30, 2004 as compared to $1.3
million for year ended September 30, 2003 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 income taxes declined by $5
thousand, to $526 thousand for year ended September 30, 2004, resulting in
an effective income tax rate of 30.6%, as compared to an effective income
tax rate of 35.5% for year ended September 30, 2003. For year ended
September 30, 2003 the Company recognized the income tax expense associated
with filing amended tax returns with respect to dividend received
deductions taken in prior years on serial trust preferred securities.
The Company's total assets increased by $7.9 million, or 3.1%, to
$264.0 million at September 30, 2004 from $256.1 million at September 30,
2003. While deposits declined by $4.2 million, or 1.9%, to $211.7 million
from $215.9 million, Federal Home Loan Bank advances increased by $12.0
million, or 126.3%, to $21.5 million at September 30, 2004 from $9.5
million at September 30, 2003. The increase in advances was used primarily
to fund deposit outflows and loan growth. During the year, some maturing
certificates of deposit and saving account customers
chose to withdraw their funds. In response to those withdrawals, the
Company increased low-cost borrowing from the Federal Home Loan Bank.
Alternatively, during the year, the Company experienced an increase in low-
cost retail checking accounts and non-interest bearing personal and
business checking accounts. Loans increased by $23.7 million, or 16.8%, to
$165.3 million at September 30, 2004 from $141.6 million at September 30,
2003. Much of this loan growth was the result of a successful wholesale
mortgage broker program and attractive retail and business loan products.
Much of the loan growth occurred in fixed-rate 25 year bi-weekly loans and
various adjustable-rate retail and commercial loans. Asset quality
remained strong, as non-performing assets declined to $121 thousand at
September 30, 2004, compared to $634 thousand at September 30, 2003.
Securities available for sale decreased by $14.6 million, or 16.7%,
to $73.0 million, at September 30, 2004 as compared to $87.6 million at
September 30, 2003. The majority of the proceeds from the sale and
maturity of securities available for sale were reinvested in the loan
portfolio. The primary areas of decrease in securities available for sale
were in the categories of federal agency obligations and federal agency
mortgage-backed securities.
Total stockholders' equity declined by $13 thousand, to $28.7 million
at September 30, 2004 primarily as a result of a decline in the after-tax
market value of securities available for sale. Accumulated other
comprehensive after-tax income at September 30, 2004 was $159 thousand, as
compared to $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
September 30, 2004 were generally higher than rates at September 30, 2003
and, accordingly, the after-tax market value of securities available for
sale declined. Deferred income tax benefits associated with this market
value decline were approximately $615 thousand.
Joseph F. MacDonough, President and CEO of the Company, commenting on
the Company's performance remarked: "the board of directors was pleased
with the trend of improved earnings over the last year. Coupled with
continued growth in the loan portfolio, increase in fee income and focused
expense management have helped position the Company to continue to grow in
the future. As always, our success is due to the hard work and dedication
of our professional staff throughout the Bank."
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 Consolidated Financial and Other Data
at
September 30,
----------------------
2004 2003
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Consolidated Balance Sheet Data ($ in thousands)
Total assets $264,010 $256,122
Loans, net 165,288 141,557
Investment securities 75,001 88,840
Total deposits 211,710 215,898
Federal Home Loan Bank advances 21,500 9,500
Stockholders' equity 28,705 28,718
Allowance for loan losses 950 911
Non-accrual loans 121 634
Non-performing assets 121 634
Consolidated Statement of Income
Years Ended
----------------------
($ in thousands, except per share data) 09/30/04 09/30/03
-------- --------
Total interest and dividend income $11,494 $12,083
Total interest expense 2,962 3,881
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Net interest income 8,532 8,202
Provision for loan losses 70 0
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Net interest income, after provision for
loan losses 8,462 8,202
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Customer service fees 661 563
Gain on sales of securities available for
sale, net 159 121
Gain on sales of mortgages, net 100 33
Miscellaneous 191 191
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Total other income 1,111 908
------- -------
Total operating expenses 7,856 7,613
------- -------
Income before provision for income taxes 1,717 1,497
Provision for income taxes 526 531
------- -------
Net income $ 1,191 $ 966
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Basic number of weighted average shares
outstanding 1,541,927 1,530,003
Dilutive number of weighted average shares
outstanding 1,562,284 1,548,849
Basic earnings per share $0.77 $0.63
Dilutive earnings per share $0.76 $0.62
Dividends declared per share $0.20 $0.20
Years Ended
----------------------
Performance Ratios: 09/30/04 09/30/03
-------- --------
Return on average assets 0.46% 0.38%
Return on average stockholders' equity 4.14% 3.39%
Dividend payout ratio (1) 26.23% 32.07%
Average stockholders' equity to average assets 11.10% 11.36%
Net interest rate spread (2) 3.32% 3.24%
Net interest margin (3) 3.53% 3.52%
Operating expenses as a percent of average assets 3.03% 3.03%
Average interest-earning assets to average
interest-bearing liabilities 117.19% 116.40%
Efficiency ratio (4) 83.72% 85.00%
(1) Dividend payout ratio represents dividends declared per share divided
by dilutive earnings per share.
(2) 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.
(3) Net interest margin represents net interest income as a percentage
of average interest-earning assets.
(4) Efficiency ratio represents total operating expenses divided by the
sum of net interest income, customer service fees and miscellaneous
income.
at
September 30,
-----------------------
Asset Quality Ratios: 2004 2003
---- ----
Non-performing loans as a percent of loans 0.07% 0.45%
Non-performing assets as a percent of total assets 0.05% 0.25%
Allowance for loan losses as a percent of total
loans before the allowance for loan losses 0.57% 0.64%
Capital Ratio and other data:
Equity to assets at end of period 10.87% 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 68 74
(1) The number of full service offices does not include our branch at the
Willows. Shaw's Supermarket branch closed in 2004.