Exhibit 99.1
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Press Release
Westborough Financial Services, Inc. Reports Results for Three-months ended
December 31, 2006
WESTBOROUGH, Mass.--(BUSINESS WIRE)--February 8, 2007 --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
three-months ended December 31, 2006 of $0.29 on a net loss of $459 thousand,
as compared to earnings of $0.06 per share (dilutive) on net income of $90
thousand for three-months ended December 31, 2005. For three-months ended
December 31, 2006, net income declined by $549 thousand as compared to
three-months ended December 31, 2005, which is primarily attributed to a
decrease in the Company's net interest margin, resulting from the effects of an
inverted yield curve, and an increase in expenses due to the pending merger
with Hudson Savings Bank. The Company's return on average assets was negative
0.62% for three-months ended December 31, 2006 as compared to 0.12% for
three-months ended December 31, 2005 and the Company's return on average
stockholders' equity was negative 6.48% for three-months ended December 31,
2006 as compared to 1.26% for three-months ended December 31, 2005.
For three-months ended December 31, 2006, net interest income declined by
$268 thousand, or 13.6%, to $1.7 million as compared to $2.0 million for
three-months ended December 31, 2005. During 2006, the Bank experienced the
effects of an inverted yield curve, where short-term interest rates were higher
than longer-term interest rates. As the Federal Reserve Open Market Committee
increased short-term rates during the year, 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 0.46%, to 2.05% for three-months ended December 31,
2006 as compared to 2.51% for three-months ended December 31, 2005. Primarily
due to an increase in the rate of interest earned on home-equity lines of
credit and commerical loans, the yield on average interest-earning assets
increased by 0.31%, to 5.33% for three-months ended December 31, 2006 from
5.02% for three-months ended December 31, 2005. However, the cost of average
interest-bearing liabilities increased by 0.77%, to 3.28% for three-months
ended December 31, 2006 from 2.52% for three-months ended December 31, 2005 and
primarily reflects higher interest rates paid on certificates of deposits, and
Federal Home Loan Bank ("FHLB") advances, as well as a migration into higher
cost money market and certificates of deposits and increased FHLB advances. The
inversion of the yield curve challenged the Bank by limiting investment
opportunities and returns. 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 increased by 8.6%, or $22 thousand to $278 thousand, for
three-months ended December 31, 2006 from $256 thousand for three-months ended
December 31, 2005, primarily as a result of an increase in miscellaneous
income, offset to a lesser extent by a decrease in customer service fees.
Miscellaneous income increased by 83.6%, or $51 thousand to $112 thousand, for
three-months ended December 31, 2006 from $61 thousand for three-months ended
December 31, 2005, primarily due to an increase in cash surrender value on Bank
Owned Life Insurance policies ("BOLI"). Customer service fees decreased by $30
thousand, or 15.4%, to $165 thousand for three-months ended December 31, 2006
from $195 thousand for three-months ended December 31, 2005 due primarily to
the receipt of prepayment fees on commercial loans during 2005.
Operating expenses increased by $385 thousand, or 18.3%, to $2.5 million
for three-months ended December 31, 2006. The primary reasons for the increase
in operating expenses were due to expenses associated with the pending merger
with Hudson Savings Bank, offset to a lesser extent by a decrease in other
general and administrative expenses. Salaries and employee benefits increased
by $247 thousand, or 21.2% to $1.4 million for three-months ended December 31,
2006 due to a bonus payment made to a senior executive and increases in
director benefit expenses, offset to a lesser extent by an increase in the cash
surrender value on supplemental executive retirement agreements for three
senior executives. Professional fees increased by $186 thousand to $302
thousand for three-months ended December 31, 2006 from $116 thousand for
three-months ended December 31, 2005, primarily due to legal and other expenses
related to the pending merger with Hudson Savings Bank. Occupancy and equipment
expenses increased by $13 thousand, or 4.8%, primarily due to depreciation
related to the completion of building improvements to our Main Office and
Northborough branch locations during 2006. Other general and administrative
expenses declined by 17.5%, or $57 thousand for three-months ended December 31,
2006, resulting from an employee opinion survey and expenses related to the
decline in mortgage lending activity.
The Company's total assets decreased by $442 thousand, or 0.1%, to $300.5
million at December 31, 2006 from $301.0 million at September 30, 2006.
Deposits decreased by $2.8 million, or 1.3%, to $208.5 million from $211.3
million, primarily in regular savings, longer-term certificates of deposit and
business checking accounts. Federal Home Loan Bank advances increased by $2.5
million, or 4.3%, to $60.0 million at December 31, 2006 from $57.5 million at
September 30, 2006. The increase in borrowings was used primarily to fund
commercial loan growth. Loans, net of allowance for loan losses, increased by
$1.3 million, or 0.6%, to $211.0 million at December 31, 2006 as compared to
$209.7 million at September 30, 2006 primarily as a result of net new
commercial loan growth. Cash and cash equivalent balances increased by $7.0
million, or 84.0%, to $15.3 million at December 31, 2006 from $8.3 million at
September 30, 2006 and such funds were invested in the securities portfolio and
reflect higher levels of short-term investments in overnight federal funds.
Total stockholders' equity decreased by $216 thousand, to $28.2 million
at December 31, 2006. Stockholders' equity decreased by the net period loss of
$459 thousand and the payment of $96 thousand in dividends to shareholders,
however it was partially offset by $255 thousand from the exercise of stock
options and a $77 thousand increase in the after-tax market value of securities
available for sale. The Company's securities available for sale consist
primarily of interest-rate sensitive securities, whose market values change
inversely with changes in market interest rates. For each three-months ended
December 31, 2006 and December 31, 2005, the Company paid a dividend of $0.06
per share.
Joseph F. MacDonough, President and CEO of the Company, commenting on the
Company's performance stated that: "the decision of the Federal Reserve to
maintain interest rates at current levels will mean continued pressure on net
interest margins over the next few months."
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
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December 31, September 30,
2006 2006
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Consolidated Balance Sheet Data ($ in thousands) (unaudited)
Total assets $300,525 $300,967
Loans, net 211,018 209,744
Investment securities 56,876 65,818
Total deposits 208,479 211,277
Federal Home Loan Bank advances 60,000 57,500
Stockholders' equity 28,167 28,383
Allowance for loan losses 810 780
Non-accrual loans 1,059 416
Non-performing assets 1,059 416
Consolidated Statement of Operations Three-months ended
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($ in thousands, except per share data) 12/31/06 12/31/05
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(unaudited)
Total interest and dividend income $3,709 $3,489
Total interest expense 2,008 1,520
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Net interest income 1,701 1,969
Provision for loan losses 30 0
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Net interest income, after provision
for loan losses 1,671 1,969
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Customer service fees 165 195
Gain on sales and calls of securities, net 1 0
Miscellaneous 112 61
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Total other income 278 256
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Total operating expenses 2,494 2,109
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Income (loss) before provision (benefit)
for income taxes (545) 116
Provision (benefit) for income taxes (86) 26
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Net (loss) income $(459) $90
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Basic number of weighted average shares outstanding 1,569,272 1,560,379
Dilutive number of weighted average shares outstanding 1,569,272 1,575,665
Basic (loss) earnings per share $(0.29) $0.06
Dilutive (loss) earnings per share $(0.29) $0.06
Dividends declared per share $0.06 $0.06
Three-months ended
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Performance Ratios: 12/31/06 12/31/05
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(unaudited)
Return (loss) on average assets -0.62% 0.12%
Return (loss) on average stockholders' equity -6.48% 1.26%
Average stockholders' equity to average assets 9.49% 9.65%
Net interest rate spread (1) 2.05% 2.51%
Net interest margin (2) 2.44% 2.84%
Operating expenses as a percent of average assets 3.34% 2.84%
Average interest-earning assets to average
interest-bearing liabilities 113.82% 115.05%
Efficiency ratio (3) 126.09% 94.79%
(1) 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.
(2) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
(3) Efficiency ratio represents total operating expenses divided by the sum
of net interest income, customer service fees and miscellaneous income.
at
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Asset Quality Ratios: December 31, September 30,
2006 2006
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(unaudited)
Non-performing loans as a percent of loans 0.50% 0.20%
Non-performing assets as a percent of total assets 0.35% 0.14%
Allowance for loan losses as a percent of
total loans 0.38% 0.37%
Capital Ratio and other data:
Equity to assets at end of period 9.37% 9.43%
Number of shares outstanding at end of period 1,608,774 1,595,774
Number of:
Full-service offices 4 4
Full-time equivalent employees 68 69