Exhibit 99.1
Press Release
Westborough Financial Services, Inc. Reports Earnings for Fiscal Year Ended
September 30, 2006
WESTBOROUGH, Mass.--(BUSINESS WIRE)--November 22, 2006--Westborough
Financial Services, Inc., (the "Company") (OTCBB: WFSM.OB) the holding company
for The Westborough Bank (the "Bank"), reported a loss per share (dilutive) for
fiscal year ended September 30, 2006 of $0.03 on a net loss of $42 thousand, as
compared earnings per share of $0.57 per share (dilutive) on net income of $898
thousand for fiscal year ended September 30, 2005. For year ended September 30,
2006, net income declined by $940 thousand, primarily due to a decline in the
Company's net interest margin, an increase in operating expenses, a decline in
other income and a decline in the credit provision for loan losses. The
Company's return (loss) on average assets was (0.01%) for year ended September
30, 2006 as compared to 0.32% for year ended September 30, 2005.
Net interest income declined by $811 thousand, or 9.7%, to $7.6 million
for year ended September 30, 2006, as compared to $8.4 million for year ended
September 30, 2005. During the fiscal year ending September 30, 2006, the Bank
experienced the effects of a relatively flat yield curve, where the difference
between short-term interest rates and longer-term interest rates was relatively
small. As the Federal Reserve Open Market Committee increased short-term rates,
the interest rates paid to interest-bearing deposit customers increased. As a
result of these changes, the net interest rate spread, which represents the
difference between the yield on average interest-earning assets and the cost of
average interest-bearing liabilities, declined by 0.61%, to 2.38% for year ended
September 30, 2006 as compared to 2.99% for year ended September 30, 2005.
Primarily due to an increase in the rate of interest earned on short-term
investments and loans, the yield on average interest-earning assets increased by
0.30%, to 5.17% for year ended September 30, 2006 from 4.87% for year ended
September 30, 2005. However, the cost of average interest-bearing liabilities
increased by 0.91%, to 2.79% for year ended September 30, 2006 from 1.88% for
year ended September 30, 2005 and primarily reflects higher interest rates paid
on interest-bearing deposit accounts and Federal Home Loan Bank ("FHLB")
advances. Compression of the net interest rate spread can be expected to result
in lower net interest income, and possibly losses, until such time as the yield
curve returns to a more normal, upward slope.
Other income declined by 18.2%, or $193 thousand to $870 thousand for year
ended September 30, 2006. Gains on the sale of securities and mortgages declined
as compared to September 30, 2005, due to a substantially lower volume of sales.
Miscellaneous income decreased by $48 thousand, or 20.3%, to $188 thousand for
year ended September 30, 2006 as compared to year ended September 30, 2005,
resulting from a reduction in income from bank owned life insurance polices.
Customer service fees increased by $71 thousand to $674 thousand for year ended
September 30, 2006 due primarily to increases in non-deposit investment income
and prepayment fees on commercial loans.
The Bank had no provision for loan losses for year ended September 30,
2006 compared to a $173 thousand (credit) provision for loan losses for year
ended September 30, 2005. The 2005 credit was the result of paydowns and the
high credit quality of specific commercial loans for which a portion of the
allowance for loan losses had been specifically allocated.
Operating expenses increased by $267 thousand, or 3.2%, to $8.6 million
for year ended September 30, 2006. The primary reasons for the increase in
operating expenses were increased salaries, employee benefits, professional
fees, and data processing fees, offset, to a lesser extent by a decline in
general and administrative and marketing expenses. Salaries and employee
benefits increased by $353 thousand, or 7.9%, to $4.8 million for year ended
September 30, 2006 as compared to year ended September 30, 2005 primarily as a
result of increased benefit costs, general salary increases for employees and
higher levels of sales incentive compensation. Professional fees increased by
$92 thousand, or 21.8%, to $514 thousand for the year ended September 30, 2006
primarily due to legal and
other expenses related to a civil action filed against the Bank and also due to
various strategic planning projects and initiatives. Primarily as a result of a
higher volume of services provided, data processing expenses increased by $32
thousand, or 4.3%, to $773 thousand for year ended September 30, 2006.
The Company's total assets increased by $9.5 million, or 3.3%, to $301.0
million at September 30, 2006 from $291.5 million at September 30, 2005.
Additionally, deposits increased by $1.0 million, or 0.5%, to $211.3 million
from $210.2 million, primarily in money market deposit accounts and certificates
of deposit. FHLB advances increased by $7.5 million, or 15.0%, to $57.5 million
at September 30, 2006 from $50.0 million at September 30, 2005. The increase in
deposits and FHLB advances were used primarily to fund loan portfolio growth
which increased by $9.2 million, or 4.6%, to $209.7 million at September 30,
2006 as compared to $200.5 million at September 30, 2005. Within the loan
portfolio, commercial loans increased by $7.4 million from September 30, 2005 to
September 30, 2006 and residential real estate and home equity lines-of-credit
increased by $1.8 million for the same period. Total stockholders' equity
declined by $220 thousand, to $28.4 million at September 30, 2006 from $28.6
million at September 30, 2005 primarily as a result of a combination of
dividends paid to shareholders and the current year loss, offset to a lesser
extent by an increase in other comprehensive income resulting from changes in
the market value of securities available for sale and stock activities.
On November 13, 2006, the Company, the Bank and Westborough Bancorp, MHC
entered into an agreement and Plan of Merger with Assabet Valley Bancorp and
Hudson Savings Bank. Under the terms of the agreement, the mutual holding
company structure of Westborough Bancorp, MHC will be eliminated and the Bank
will merge with Hudson Savings Bank. The stockholders of the Company, other than
Westborough Bancorp, MHC, will receive $35.00 in cash in exchange for each share
of common stock. The transaction is expected to be completed in the spring of
2007.
Joseph F. MacDonough, President and CEO of the Company, commenting on the
Company's performance remarked that: "We were disappointed that our efforts to
maintain profitability fell short. The current interest rate environment and the
shape of the yield curve has and will continue to pressure our net interest
margin and our profitability. During the year however, we were able to bring to
fruition one of our long-term goals of partnering with Hudson Savings Bank. With
this merger, announced November 14, 2006, we will create a new larger and
stronger company that will insure top flight product and service offerings to
our customers. Both institutions were founded in 1869 and have a proud history
of serving its customers and the entire communities where we live and do
business. We expect many exciting opportunities in the months ahead for
customers, staff and stockholders as the transaction completes its regulatory
process."
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. 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,
------------------------
2006 2005
------------------------
Consolidated Balance Sheet Data ($ in thousands)
Total assets $300,967 $291,490
Loans, net 209,744 200,477
Investment securities 65,818 66,906
Total deposits 211,277 210,281
Federal Home Loan Bank advances 57,500 50,000
Stockholders' equity 28,383 28,603
Allowance for loan losses 780 785
Non-accrual loans 416 175
Non-performing assets 416 175
- ---------------------------------------------------------------------------------------------
Consolidated Statement of Operations Years Ended
------------------------
($ in thousands, except share data) 09/30/06 09/30/05
------------------------
Total interest and dividend income $14,422 $12,564
Total interest expense 6,841 4,172
------- -------
Net interest income 7,581 8,392
Provision (credit) for loan losses 0 (173)
------- -------
Net interest income, after provision (credit) for loan losses 7,581 8,565
------- -------
Customer service fees 674 603
Gain on sales and calls of securities available for sale, net 3 59
Gain on sales of mortgages, net 5 165
Miscellaneous 188 236
------- -------
Total other income 870 1,063
------- -------
Total operating expenses 8,616 8,349
------- -------
(Loss) income before provision (benefit) for income taxes (165) 1,279
Provision (benefit) for income taxes (123) 381
------- -------
Net (loss) income $ (42) $ 898
======= =======
Basic number of weighted average shares outstanding 1,562,323 1,554,853
Dilutive number of weighted average shares outstanding 1,562,323 1,571,204
Basic earnings(loss) per share $(0.03) $0.58
Dilutive earnings (loss) per share $(0.03) $0.57
Dividends declared per share $ 0.24 $0.24
- ---------------------------------------------------------------------------------------------
Years Ended
------------------------
Performance Ratios: 09/30/06 09/30/05
------------------------
Return (loss) on average assets -0.01% 0.32%
Return (loss) on average stockholders' equity -0.15% 3.11%
Average stockholders' equity to average assets 9.47% 10.43%
Net interest rate spread (2) 2.38% 2.99%
Net interest margin (3) 2.72% 3.25%
Operating expenses as a percent of average assets 2.88% 3.02%
Average interest-earning assets to average
interest-bearing liabilities 113.91% 116.44%
Efficiency ratio (4) 102.05% 90.45%
(1) Dividend payout ratio represents dividends declared per share divided by
dilutive earnings (loss) 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
------------------------
Asset Quality Ratios: September 30,
------------------------
2006 2005
------------------------
Non-performing loans as a percent of loans 0.20% 0.09%
Non-performing assets as a percent of total assets 0.14% 0.06%
Allowance for loan losses as a percent of total loans
before the allowance for loan losses 0.37% 0.39%
Capital Ratio and other data:
Equity to assets at end of period 9.43% 9.81%
Number of shares outstanding at end of period 1,595,774 1,594,774
Number of:
Full-service offices (1) 4 4
Full-time equivalent employees 69 71
(1) The number of full service offices does not include our branch at the
Willows.