UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
Commission file number 001-16767
Westfield Financial, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 73-1627673
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 Elm Street, Westfield, Massachusetts 01085
(Address of principal executive offices)
(Zip Code)
(413) 568-1911
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_X_ No___.
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer Accelerated filer X Non-accelerated filer
--- --- ---
Indicate by check mark whether the registrant is a shell company. Yes No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Outstanding at
Class November 6, 2007
- ----------------------------------- ----------------------------------
Common Stock, $0.01 par value 31,933,547
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements of Westfield Financial, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited) - September 30, 2007 and
December 31, 2006
Consolidated Statements of Income (Unaudited) - Three and nine months
ended September 30, 2007 and 2006
Consolidated Statement of Changes in Stockholders' Equity and
Comprehensive Income (Unaudited) - Nine months ended September 30,
2007 and 2006
Consolidated Statements of Cash Flows (Unaudited) - Nine months ended
September 30, 2007 and 2006
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
Exhibits
1
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements"
which may be identified by the use of such words as "believe," "expect,"
"anticipate," "should," "planned," "estimated," and "potential." Examples of
forward-looking statements include, but are not limited to, estimates with
respect to our financial condition and results of operation and business that
are subject to various factors which could cause actual results to differ
materially from these estimates including, but not limited to, changes in the
real estate market or local economy, changes in interest rates, changes in laws
and regulations to which we are subject, and competition in our primary market
area.
Any or all of our forward-looking statements in this Quarterly Report on
Form 10-Q and in any other public statements we make may turn out to be wrong.
They can be affected by inaccurate assumptions we might make or unknown risks
and uncertainties. Consequently, no forward-looking statements can be
guaranteed. We disclaim any obligation to subsequently revise any
forward-looking statements to reflect events or circumstances after the date of
such statements, or to reflect the occurrence of anticipated or unanticipated
events.
2
PART 1
ITEM 1: FINANCIAL STATEMENTS
Westfield Financial, Inc. and Subsidiaries
Consolidated Balance Sheets - Unaudited
(Dollars in thousands, except share data)
September 30, December 31,
2007 2006
---- ----
ASSETS
Cash and due from banks $ 17,869 $ 51,645
Federal funds sold 35,061 97,659
Interest-bearing deposits and other short term investments 23 5,204
---------- --------
Cash and cash equivalents 52,953 154,508
---------- --------
SECURITIES:
Available for sale - at estimated fair value 38,004 41,687
Held to maturity - at amortized cost (estimated fair value of
$109,323 at September 30, 2007, and $76,938 at December 31, 2006) 109,025 77,299
MORTGAGE-BACKED SECURITIES:
Available for sale - at estimated fair value 201,594 126,942
Held to maturity - at amortized cost (estimated fair value of
$174,678 at September 30, 2007 and $160,709 at December 31, 2006) 176,402 163,093
FEDERAL HOME LOAN BANK OF BOSTON AND OTHER STOCK 6,610 4,246
LOANS - Net of allowance for loan losses of $5,793 at
September 30, 2007 and $5,437 at December 31, 2006 402,088 385,184
PREMISES AND EQUIPMENT, Net 13,196 12,247
ACCRUED INTEREST AND DIVIDENDS 5,676 4,502
BANK-OWNED LIFE INSURANCE 32,062 20,619
OTHER ASSETS 5,978 6,502
---------- --------
TOTAL ASSETS $1,043,588 $996,829
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
DEPOSITS:
Noninterest-bearing $ 40,052 $ 42,383
Interest-bearing 574,117 585,083
---------- --------
Total deposits 614,169 627,466
---------- --------
CUSTOMER REPURCHASE AGREEMENTS 22,823 17,919
FEDERAL HOME LOAN BANK OF BOSTON ADVANCES 103,000 55,000
OTHER LIABILITIES 13,994 7,036
---------- --------
TOTAL LIABILITIES 753,986 707,421
---------- --------
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value, 5,000,000 shares authorized,
none outstanding at September 30, 2007 and December 31, 2006 - -
Common stock - $.01 par value, 75,000,000 shares authorized, 31,926,587
shares issued and outstanding at September 30, 2007; 82,034,500 shares
authorized, 34,717,000 shares issued and 31,924,257 shares outstanding
at December 31, 2006 319 274
Additional paid-in capital 208,983 201,736
Unallocated Common Stock of Employee Stock Ownership Plan (11,703) (4,835)
Unearned compensation (5,760) (405)
Retained earnings 97,647 93,364
Accumulated other comprehensive income (loss) 116 (726)
---------- --------
Total stockholders' equity 289,602 289,408
---------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,043,588 $996,829
========== ========
See accompanying notes to consolidated financial statements.
3
Westfield Financial, Inc. and Subsidiaries
Consolidated Statements of Income - Unaudited
(Dollars in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
---- ---- ---- ----
INTEREST AND DIVIDEND INCOME:
Residential and commercial real estate loans $ 4,621 $ 4,426 $ 13,430 $ 13,088
Debt securities, taxable 5,813 3,687 15,760 10,471
Commercial and industrial loans 2,240 1,974 6,233 5,597
Debt securities, tax-exempt 334 307 969 923
Marketable equity securities 151 124 458 350
Federal funds sold 502 111 2,437 439
Consumer loans 89 97 270 313
Interest-bearing deposits and other short term investments 2 1 98 88
---------- ---------- ---------- ----------
Total interest and dividend income 13,752 10,727 39,655 31,269
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 4,989 4,585 14,708 12,460
Customer repurchase agreements 168 132 442 290
Other borrowings 1,016 466 1,993 1,285
---------- ---------- ---------- ----------
Total interest expense 6,173 5,183 17,143 14,035
---------- ---------- ---------- ----------
Net interest and dividend income 7,579 5,544 22,512 17,234
PROVISION FOR LOAN LOSSES 50 50 225 325
---------- ---------- ---------- ----------
Net interest and dividend income after provision
for loan losses 7,529 5,494 22,287 16,909
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Income from bank-owned life insurance 331 201 923 595
Service charges and fees 594 670 1,795 2,014
Loss on sales of fixed assets, net - (378) - (378)
Gain on sales of securities, net 39 - 39 -
---------- ---------- ---------- ----------
Total noninterest income 964 493 2,757 2,231
---------- ---------- ---------- ----------
NONINTEREST EXPENSE:
Salaries and employees benefits 3,484 3,014 10,088 9,002
Occupancy 591 533 1,758 1,553
Computer operations 344 316 1,056 1,082
Stationery, supplies and postage 122 120 375 374
Other 810 894 2,960 2,567
---------- ---------- ---------- ----------
Total noninterest expense 5,351 4,877 16,237 14,578
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 3,142 1,110 8,807 4,562
INCOME TAXES 970 236 2,710 1,115
---------- ---------- ---------- ----------
NET INCOME $ 2,172 $ 874 $ 6,097 $ 3,447
========== ========== ========== ==========
EARNINGS PER COMMON SHARE:
Basic earnings per share $ 0.07 $ 0.03 $ 0.20 $ 0.11
Average shares outstanding 29,785,103 30,680,142 29,999,156 30,615,656
Diluted earnings per share $ 0.07 $ 0.03 $ 0.20 $ 0.11
Diluted average shares outstanding 30,248,763 31,256,723 30,498,623 31,204,677
See accompanying notes to consolidated financial statements.
4
WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME - UNAUDITED
(Dollars in thousands, except share data)
Common Stock Restricted Accumulated
------------------ Additional Stock Other
Par Paid-In Unallocated Unearned Retained Comprehensive
Shares Value Capital ESOP Compensation Earnings (Loss) Income Total
-------- ----- ---------- ---- ------------ -------- ------------- -----
Balance at December 31, 2006 9,728,912 $ 274 $201,736 $ (4,835) $ (405) $93,364 $ (726) $289,408
Comprehensive income:
Net income - - - - - 6,097 - 6,097
Unrealized gains on
securities arising during
the period, net of tax
benefit of $468 - - - - - - 865 865
Reclassification for gains
included in net income,
net of tax of $16 - - - - - - (23) (23)
--------
Comprehensive income 6,939
--------
Exchange of common stock
pursuant to reorganization
(9,728,912 shares exchanged
at a 3.28138 ratio for
31,923,903 shares) 21,458,991 38 (358) - - - - (320)
Capital contribution pursuant
to dissolution of Mutual
Holding Company - - - - - 2,713 - 2,713
Shared-based compensation - - 500 492 460 - - 1,452
Share-based compensation
restricted stock - - 5,815 - (5,815) - - -
Purchase of ESOP shares 736,000 7 7,353 (7,360) - - - -
Purchase of common stock in
connection with recognition - - (6,075) - - - - (6,075)
Issuance of common stock in
connection with stock
option exercises 2,684 - 12 - - - - 12
Cash dividends declared
($.15 per share) - - - - - (4,527) - (4,527)
---------- ----- -------- -------- ------- ------- ------- --------
Balance, September 30, 2007 31,926,587 $ 319 $208,983 $(11,703) $(5,760) $97,647 $ 116 $289,602
========== ===== ======== ======== ======= ======= ======= ========
Balance at December 31, 2005 10,580,000 $ 106 $ 48,020 $ (5,127) $ (861) $92,789 $(1,177) $115,842
Comprehensive income:
Net income - - - - - 3,447 - 3,447
Unrealized losses on
securities arising during
the period, net of tax
benefit of $159 - - - - - - 289 289
--------
Comprehensive income - - - - - - - 3,736
--------
Activity related to common
stock issued as employee
incentives - - 377 219 329 - - 925
Common stock repurchases - - (1,583) - - - - (1,583)
Issuance of common stock in
connection with stock
option exercises - - 857 - - (294) - 563
Cash dividends declared
($.85 per share) - - - - - (2,457) - (2,457)
---------- ----- -------- -------- ------- ------- ------- --------
Balance at September 30, 2006 10,580,000 $ 106 $ 48,397 $ (4,908) $ (532) $93,485 $ (888) $117,026
========== ===== ======== ======== ======= ======= ======= ========
See accompanying notes to consolidated financial statements.
5
Westfield Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Unaudited
(Dollars in thousands)
Nine Months
Ended September 30,
2007 2006
---- ----
OPERATING ACTIVITIES:
Net income $ 6,097 $ 3,447
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 225 325
Depreciation of premises and equipment 801 773
Net amortization of premiums and discounts on securities,
mortgage-backed securities, and mortgage loans 264 497
Share-based compensation expense 1,953 1,278
Excess tax benefit from share-based compensation (56) -
Loss on sale of fixed assets - 378
Net realized securities gains (39) -
Deferred income tax benefit - (52)
Increase in cash surrender value of bank-owned life insurance (923) (595)
Changes in assets and liabilities:
Accrued interest receivable (1,174) (467)
Other assets 112 (739)
Other liabilities 6,958 541
--------- --------
Net cash provided by operating activities 14,218 5,386
--------- --------
INVESTING ACTIVITIES:
Securities, held to maturity:
Purchases (41,738) (13,087)
Proceeds from, maturities, and principal collections 10,000 8,000
Securities, available for sale:
Purchases (26,226) (11,242)
Proceeds from sales 15,111 -
Proceeds from calls, maturities, and principal collections 15,059 3,000
Mortgage-backed securities, held to maturity:
Purchases (44,298) (27,993)
Principal collections 30,764 26,793
Mortgage-backed securities, available for sale:
Purchases (99,473) (29,884)
Proceeds from sales 272 -
Principal collections 25,636 19,515
Purchase of Federal Home Loan Bank of Boston stock (2,581) (9)
Proceeds from sale of Federal Hole Loan Bank of Boston stock 217 -
Purchase of residential mortgages (1,634) (11,705)
Net other (increase) decrease in loans (15,521) 10,452
Purchases of premises and equipment (1,750) (1,668)
Proceeds from sale of fixed assets - 10
Purchase of bank-owned life insurance (10,520) -
--------- --------
Net cash used in investing activities (146,682) (27,818)
--------- --------
FINANCING ACTIVITIES:
(Decrease) increase in deposits (13,297) 15,059
Increase in customer repurchase agreements 4,904 5,586
Repayment of Federal Home Loan Bank Advances (39,368) -
Federal Home Loan Bank of Boston advances 87,368 10,000
Cash dividends paid (4,527) (2,457)
Exchange of common stock pursuant to reorganization (320) -
Capital contribution pursuant to dissolution of MHC 2,713 -
Common stock purchased - (1,583)
Issuance of common stock in connection with stock option exercises 12 563
Purchase of common stock in connection with employee benefit program (501) (353)
Purchase of common stock in connection with retention and recognition plan (6,075) -
--------- --------
Net cash provided by financing activities 30,909 26,815
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS: (101,555) 4,383
Beginning of period 154,508 26,456
--------- --------
End of period $ 52,952 $ 30,839
========= ========
See accompanying notes to consolidated financial statements.
6
WESTFIELD FINANCIAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Westfield Financial, Inc. was organized as a
Massachusetts-chartered stock holding company in November 2001 in connection
with the reorganization of Westfield Mutual Holding Company, a
federally-chartered mutual holding company. As part of the reorganization,
Westfield Financial offered for sale 47% of its common stock. The remaining 53%
of Westfield Financial's shares were issued to Westfield Mutual Holding
Company. The reorganization and related stock offering were completed on
December 27, 2001.
On January 3, 2007, Westfield Financial completed its stock offering in
connection with the second step conversion of Westfield Mutual Holding Company.
As part of the conversion, New Westfield Financial, Inc. succeeded Westfield
Financial as the stock holding company of Westfield Bank, and Westfield Mutual
Holding Company was dissolved. In the stock offering, a total of 18,400,000
shares representing Westfield Mutual Holding Company's ownership interest in
Westfield Financial were sold by New Westfield Financial in a subscription
offering, community offering and syndicated offering. In addition, each
outstanding share of Westfield Financial as of January 3, 2007 was exchanged
for 3.28138 new shares of New Westfield Financial common stock. New Westfield
Financial, Inc. changed its name to Westfield Financial, Inc. effective January
3, 2007.
Westfield Bank is a federally-chartered stock savings bank subsidiary of
Westfield Financial. Westfield Bank's deposits are insured to the limits
specified by the Federal Deposit Insurance Corporation ("FDIC"). Westfield Bank
operates eleven branches in Western Massachusetts. Westfield Bank's primary
source of revenue is earnings on loans to small and middle-market businesses
and to residential property homeowners.
Elm Street Securities Corporation and WFD Securities Corporation,
Massachusetts-chartered security corporations, were formed by Westfield
Financial for the primary purpose of holding qualified investment securities.
The conversion was accounted for as a reorganization in corporate form with no
change in the historical basis of Westfield Financial's assets, liabilities,
and equity. All references to the number of shares outstanding, including
references for purposes of calculating per share amounts, are restated to give
retroactive recognition to the exchange ratio applied in the conversion.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company, the Bank, Westfield Securities Corp. and Elm Street
Securities Corporation. All material intercompany balances and transactions
have been eliminated in consolidation.
Estimates - The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of income and expenses for each. Actual results could
differ from those estimates. Estimates that are particularly susceptible to
significant change in the near-term relate to the determination of the fair
value of financial instruments and the allowance for loan losses.
7
2. EARNINGS PER SHARE
Basic earnings per share represents income available to stockholders divided by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share reflects additional common share that would have
been outstanding if dilutive potential shares had been issued, as well as any
adjusted income that would result from the assumed issuance. Per share amounts
related to periods prior to the date of completion of the conversion (January
3, 2007) have been restated to give retroactive recognition to the exchange
ratio applied in the conversion (3.28138). Potential common shares that may be
issued by Westfield Financial relate solely to outstanding stock awards and
options and are determined using the treasury stock method.
Earnings per common share for the three and nine months ended September 30,
2007 and 2006, have been computed based on the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
---- ---- ---- ----
(In thousands, except per share data)
Net income available to common stockholders $ 2,172 $ 874 $ 6,097 $ 3,447
======= ======= ======= =======
Weighted average number of common stock outstanding 29,785 30,680 29,999 30,616
Effect of dilutive stock awards and options 464 577 500 589
------- ------- ------- -------
Adjusted weighted average number of common stock
outstanding used to calculate diluted earnings per share 30,249 31,257 30,499 31,205
======= ======= ======= =======
Basic earnings per share $ .07 $ .03 $ .20 $ .11
Diluted earnings per share $ .07 $ .03 $ .20 $ .11
3. SHARE-BASED COMPENSATION
Under Westfield Financial's 2002 Stock Option Plan and 2007 Stock Option Plan,
Westfield Financial may grant options to its directors, officers, and employees
for up to 1,631,682 shares and 1,560,101 shares, respectively, of common stock.
Both incentive stock options and non-statutory stock options may be granted
under the plan. The exercise price of each option equals the market price of
Westfield Financial's stock the date of grant with a maximum term of ten years.
All options currently outstanding vest at 20% per year.
As of May 2007, all remaining shares under the 2002 Stock Option Plan were
fully allocated and no shares are currently available for future grants. The
2007 Stock Option Plan was approved by the shareholders at the annual meeting
of shareholders on July 19, 2007. In August, 2007, 1,351,702 shares of common
stock were granted from the 2007 Stock Option Plan. At September 30, 2007,
208,399 shares were available for future grants.
8
Westfield Financial adopted Statement of Financial Accounting Standard No.
123(R), "Share-Based Payment" ("SFAS 123 (R)" or the "Statement"), on January
1, 2006 using the "modified prospective" method. Under this method, awards that
are granted, modified, or settled after December 31, 2005 are measured and
accounted for in accordance with SFAS 123(R). SFAS 123(R) permits entities to
use any option-pricing model that meets the fair value objective in the
Statement. Westfield Financial uses the binomial model for its adoption of the
statement. Under the "modified perspective" method, expense is recognized for
awards that were granted prior to January 1, 2006, based on the fair value
determined at the grant date under SFAS 123, (Accounting for Stock-Based
Compensation" ("SFAS 123").
The adoption of SFAS 123(R) by Westfield Financial resulted in additional
share-based compensation expense of $88,000 and $73,000, and a related tax
benefit of $21,000 and $17,000 for the three months ended September 30, 2007
and 2006, respectively. Additional share-based compensation was $245,000 and
$219,000, and a related tax benefit was $56,000 and $51,000 for the nine months
ended September 30, 2007 and 2006, respectively. As of September 30, 2007 the
compensation cost of unvested stock options amounted to $3.9 million with a
related tax benefit of $1.0 million.
A summary of the status of Westfield Financial's stock options at September 30,
2007 is presented below:
Weighted Average Weighted Average
Grant Date Call Value
Shares Fair Value Per Option
------ ---------- ----------
Balance at December 31, 2006 1,217,050 $ 4.43 $1.17
Shares Granted (2002 Stock Option Plan) 50,155 10.11 2.43
Shares Granted (2007 Stock Option Plan) 1,351,702 10.04 2.70
Shares Exercised (2,684) 4.39 1.19
---------
Balance at September 30, 2007 2,716,223 $ 7.54 $2.00
=========
The fair value of each option grant is estimated on the date of grant using the
binomial pricing model with the following weighted average assumptions:
Nine Months Ended
September 30,
2007
----
Options granted under the 2002 Stock Option Plan:
Expected dividend Yield low 1.98%
Expected dividend yield high 3.00%
Expected life 10 years
Expected volatility 16.39%
Risk-free interest rate 4.83%
Options granted under the 2007 Stock Option Plan:
Expected dividend yield low 1.99%
Expected dividend yield high 3.00%
Expected life 10 years
Expected volatility 20.39%
Risk-free interest rate 4.53%
No stock options were granted in the nine months ended
September 30, 2006
9
Information pertaining to options outstanding at September 30, 2007 is as
follows:
Aggregate Intrinsic Weighted Average Aggregate Intrinsic
Exercise Number Value of Remaining Number Value of
Price Outstanding Outstanding shares Contractual Life Exercisable Exercisable Shares
----- ----------- ------------------ ---------------- ----------- ------------------
(In thousands) (In thousands)
$ 4.39 1,197,960 $6,373 4.9 Years 1,197,960 $6,373
7.52 8,203 18 7.4 Years 6,562 14
7.62 8,203 17 6.4 Years 4,922 10
10.11 150,155 (60) 9.8 Years - -
10.04 1,351,702 (446) 10.0 Years - -
--------- ------ ------
2,716,223 $5,902 1,209,444 $6,397
========= ====== ========= ======
4. STOCK AWARDS
Under Westfield Financial's 2002 Recognition and Retention Plan and 2007
Recognition and Retention Plan, Westfield Financial may grant stock awards to
its directors, officers and employees for up to 652,664 shares and 624,041
shares, respectively, of common stock. In May 2007, all remaining shares under
the 2002 Recognition and Retention Plan were fully allocated and no shares are
currently available for future grants. The 2007 Recognition and Retention Plan
was approved by the shareholders at the annual meeting of shareholders on July
19, 2007. In August 2007, 559,000 shares of common stock were granted under the
2007 Recognition and Retention Plan. As of September 30, 2007, 65,041 shares
were available for future grants.
Westfield Financial applies SFAS 123(R) in accounting for stock awards. The
stock allocations, based on the market price at the date of grant, are recorded
as unearned compensation. Unearned compensation is amortized over the vesting
period. Westfield Financial recorded compensation cost related to the stock
awards of approximately $218,000 and $463,000 for the three and nine months
ended September 30, 2007, respectively. Compensation cost related to stock
awards was approximately $119,000 and $356,000 for the three and nine months
ended September 30, 2006.
5. EMPLOYEE STOCK OWNERSHIP PLAN
In January 2002, Westfield Financial established an Employee Stock Ownership
Plan (the "ESOP") for the benefit of each employee that has reached the age of
21 and has completed at least 1,000 hours of service in the previous
twelve-month period. As part of the conversion, Westfield Financial provided a
loan to the Westfield Financial Employee Stock Ownership Plan Trust which was
used to purchase 8%, or 1,305,359 shares, of Westfield Financial's outstanding
stock in the open market. In January 2007, as part of the second step stock
conversion, Westfield Financial provided a loan to the Westfield Financial
Employee Stock Ownership Plan Trust which was used to purchase 4.0%, or 736,000
shares, of the 18,400,000 shares of common stock sold in the offering. The 2002
and 2007 loans bear interest equal to 8.0% and provide for annual payments of
interest and principal.
At September 30, 2007 the remaining principal balance is payable as follows:
Years Ending
December 31, (In thousands)
------------ --------------
2007 $ 447
2008 447
2009 447
2010 447
2011 447
Thereafter 10,161
-------
$12,396
=======
10
Westfield Bank has committed to make contributions to the ESOP sufficient to
support the debt service of the loans. The loans are secured by the shares
purchased, which are held in a suspense account for allocation among the
participants as the loans are paid. Total compensation expense applicable to
the ESOP amounted to $237,000 and $748,000 for the three and nine months ended
September 30, 2007 and $126,000 and $352,000 for the three and nine months
ended September 30, 2006.
6. PENSION AND OTHER BENEFITS
The following provides information regarding net benefit costs for the period
shown:
Pension Benefits Other Benefits
---------------- --------------
Three months ended September 30,
2007 2006 2007 2006
---- ---- ---- ----
Service cost $ 175 $ 181 $ 8 $ 7
Interest cost 145 150 12 12
Expected return on assets (162) (149) - -
Transaction obligation (3) (3) 2 2
Actuarial loss - 11 - 1
----- ----- --- ---
Net periodic pension cost $ 155 $ 190 $22 $22
===== ===== === ===
Pension Benefits Other Benefits
---------------- --------------
Nine months ended September 30,
2007 2006 2007 2006
---- ---- ---- ----
Service cost $ 526 $ 543 $23 $22
Interest cost 436 450 37 35
Expected return on assets (485) (447) - -
Transaction obligation (9) (9) 6 7
Actuarial loss (1) 32 - 2
----- ----- --- ---
Net periodic pension cost $ 467 $ 569 $66 $66
===== ===== === ===
Westfield Financial plans to contribute the amount required to meet the minimum
funding standards under Internal Revenue Code Section 412. Additional
contributions will be made as deemed appropriate by management in conjunction
with the plan's actuaries. For the year 2007, the preliminary estimated
contribution is approximately $535,000. As of September 30, 2007 no
contribution had been made.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements," which defines fair value, establishes a framework for measuring
fair value in accordance with generally accepted accounting principles, and
expands disclosures about fair value measurements. This Statement is effective
for Westfield Bank on January 1, 2008, with early adoption permitted and is not
expected to have a material impact on Westfield Bank's consolidated financial
statements.
11
In September 2006, the FASB ratified EITF 06-4, "Accounting for Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
Life Insurance Arrangements." This issue addresses accounting for split-dollar
life insurance arrangements whereby the employer purchases a policy to insure
the life of an employee, and separately enters into an agreement to split the
policy benefits between the employer and the employee. This EITF states that an
obligation arises as a result of a substantive agreement with an employee to
provide future postretirement benefits. Under EITF 06-4, the obligation is not
settled upon entering into an insurance arrangement. Since the obligation is
not settled a liability should be recognized in accordance with applicable
authoritative guidance. EITF 06-4 is effective for Westfield Bank's 2008 fiscal
year and Westfield Bank is in the process of evaluating the potential impacts
of adopting EITF 06-4 on its consolidated financial statements.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," which provides companies with an
option to report selected financial assets and liabilities at fair value.
Statement No. 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between companies and choose different
measurement attributes for similar types of assets and liabilities. This
Statement is effective for Westfield Bank on January 1, 2008, with early
adoption permitted for fiscal 2007, provided that Westfield Bank also adopts
Statement No. 157 for fiscal 2007. Management is in the process of evaluating
the potential impacts of adopting SFAS No. 159 on its consolidate financial
statements.
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Overview
Westfield Financial strives to remain a leader in meeting the financial service
needs of the local community and to provide quality service to the individuals
and businesses in the market areas that it has served since 1853. Historically,
Westfield Bank has been a community-oriented provider of traditional banking
products and services to business organizations and individuals, including
products such as residential and commercial real estate loans, consumer loans
and a variety of deposit products. Westfield Bank meets the needs of its local
community through a community-based and service-oriented approach to banking.
On January 3, 2007, Westfield Financial completed its stock offering in
connection with the second step conversion of Westfield Mutual Holding Company.
As part of the conversion, New Westfield Financial, Inc. succeeded Westfield
Financial as the stock holding company of Westfield Bank, and Westfield Mutual
Holding Company was dissolved. In the stock offering, a total of 18,400,000
shares representing Westfield Mutual Holding Company's ownership interest in
Westfield Financial were sold by New Westfield Financial in a subscription
offering, community offering and syndicated offering. In addition, each
outstanding share of Westfield Financial as of January 3, 2007 was exchanged
for 3.28138 new shares of New Westfield Financial common stock. New Westfield
Financial, Inc. changed its name to Westfield Financial, Inc. effective January
3, 2007. Proceeds, net of stock issuance costs, were approximately $171.2
million.
Westfield Financial has adopted a growth-oriented strategy that has focused on
increased commercial lending. Westfield Financial's strategy also calls for
increasing deposit relationships and broadening its product lines and services.
Westfield Financial believes that this business strategy is best for its long
term success and viability, and complements its existing commitment to high
quality customer service. In connection with its overall growth strategy,
Westfield Bank seeks to:
12
o continue to grow its commercial and industrial and commercial real
estate loan portfolio by targeting businesses in its primary market
area and in northern Connecticut as a means to increase the yield
on and diversify its loan portfolio and build transactional deposit
account relationships;
o focus on expanding its retail banking franchise and increase the
number of households served within its market area; and
o depending on market conditions, refer substantially all of the
fixed-rate residential real estate loans to a third party mortgage
company which underwrites, originates and services these loans in
order to diversify its loan portfolio, increase fee income and
reduce interest rate risk.
Please review our financial results for the quarter ended September 30, 2007 in
the context of this strategy.
o Net income was $2.2 million, or $0.07 per diluted share, for the
quarter ended September 30, 2007 compared to $0.9 million, or $0.03
per diluted share for the same period in 2006. For the nine months
ended September 30, 2007, net income was $6.1 million, or $0.20 per
diluted share, compared to $3.4 million, or $0.11 per diluted
share, for the same period in 2006.
o Net interest income was $7.6 million for the three months ended
September 30, 2007 and $5.5 million for the same period in 2006.
Net interest income was $22.5 million for the nine months ended
September 30, 2007 and $17.2 million for the same period in 2006.
The increase in net interest income was mainly due to an increase
in average earning assets as a result of funds raised in the second
step stock offering. The net interest margin, on a tax equivalent
basis, was 3.18% and 3.27% for the three and nine months,
respectively, ended September 30, 2007, compared to 2.94% and 3.11%
in the same periods in 2006.
o Total assets increased $46.8 million to $1.0 billion at September
30, 2007 from $996.8 million at December 31, 2006. Investment
securities increased $116.0 million to $525.0 million at September
30, 2007 from $409.0 million at December 31, 2006. Investment
securities increased as management invested the proceeds of the
second step stock offering. Cash and cash equivalents decreased
$101.5 million to $53.0 million at September 30, 2007 from $154.5
million at December 31, 2006. The decrease in cash and cash
equivalents is the result of using funds to purchase investment
securities.
o Net loans increased by $16.9 million to $402.1 million at September
30, 2007 from $385.2 million at December 31, 2006. This increase in
net loans was primarily the result of an increase of $10.7 million
in commercial and industrial loans, which were $111.1 million at
September 30, 2007 and $100.4 million at December 31, 2006.
Commercial real estate loans increased $6.9 million to $181.4
million at September 30, 2007 from $174.5 million at December 31,
2006.
o Residential real estate loans were $110.0 million at September 30,
2007 and $109.9 million at December 31, 2006. Since September 2001,
Westfield Bank has referred substantially all of the originations
of its residential real estate loans to a third party mortgage
company. Residential real estate borrowers submit applications to
Westfield Bank, but the loan is approved by and closed on the books
of the mortgage company. The third party mortgage company owns the
servicing rights and services the loans. Westfield Bank retains no
residual ownership interest in these loans.
o Asset growth was funded primarily through a $48.0 million increase
in Federal Home Loan Bank borrowings, which totaled $103.0 million
at September 30, 2007. In addition, customer repurchase agreements
increased $4.9 million to $22.8 million at September 30, 2007 from
$17.9 million at December 31, 2006. At September 30, 2007, all of
Westfield Bank's customer repurchase agreements were held by
commercial customers.
13
o Total deposits decreased $13.3 million to $614.2 million at
September 30, 2007 from $627.5 million at December 31, 2006. The
decrease in total deposits was due to a decrease in money market
account and time deposits, partially offset by an increase in
regular savings accounts. Money market accounts decreased $12.9
million to $81.6 million at September 30, 2007. Time deposits
decreased $6.1 million to $367.9 million at September 30, 2006.
These decreases were partially offset by an increase of $6.5
million in regular savings accounts which was fueled by a new
product with a higher interest rate.
o Nonperforming loans were $1.5 million at September 30, 2007 and
$1.0 million December 31, 2006. This represents 0.36% and 0.26% of
total loans at September 30, 2007 and December 31, 2006,
respectively. Charge-offs decreased by $511,000 to $59,000 for the
nine months ended September 30, 2007 from $570,000 for the nine
months ended September 30, 2006.
o The allowance for loan losses was $5.8 million at September 30,
2007 and $5.4 million at December 31, 2006. This represents 1.42%
of total loans at September 30, 2007 and 1.39% of total loans at
December 31, 2006. At these levels, the allowance for loan losses
as a percentage of nonperforming loans was 390% at September 30,
2007 and 529% at December 31, 2006.
o Stockholders' equity at September 30, 2007 and December 31, 2006
was $289.6 million and $289.4 million, respectively, which
represented 27.8% of total assets as of September 30, 2007 and
29.0% of total assets as of December 31, 2006.
o Noninterest expense for the three months ended September 30, 2007
was $5.4 million compared to $4.9 million for the same period in
2006. Noninterest expense for the nine months ended September 30,
2007 was $16.2 million compared to $14.6 million for the same
period in 2006. Salaries and benefits increased $470,000 and $1.1
million for the three and nine months ended September 30, 2007,
respectively, compared to the same periods in 2006. The increase in
salaries and benefits is primarily the result of hiring new
employees, the implementation of new share-based compensation
plans, and normal increases in employee salaries and benefit costs.
Much of the new hiring was associated with a new Westfield Bank
branch which opened for business during the second quarter of 2007.
CRITICAL ACCOUNTING POLICIES
Westfield Financial's critical accounting policies, given its current business
strategy and asset/liability structure, are accounting for nonperforming loans,
the allowance for loan losses and provision for loan losses, the classification
of securities as either held to maturity or available for sale, other than
temporary impairment of securities, and discount rate assumptions used for
benefit liabilities. Senior management has discussed the development and
selection of these accounting estimates and the related disclosures with the
Audit Committee of Westfield Financial's Board of Directors.
On a quarterly basis, Westfield Financial reviews available for sale investment
securities with unrealized depreciation on a judgmental basis to assess whether
the decline in fair value is temporary or other than temporary. Declines in the
fair value of held to maturity and available for sale securities below their
cost that are deemed to be other than temporary are reflected in earnings as
realized losses. In estimating other than temporary impairment losses,
management considers (1) the length of time and the extent to which the fair
value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the intent and ability of the corporation to
retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value.
14
Securities, including mortgage-backed securities, that management has the
positive intent and ability to hold until maturity are classified as held to
maturity and are carried at amortized cost. Securities, including
mortgage-backed securities, that have been identified as assets for which there
is not a positive intent to hold to maturity are classified as available for
sale and are carried at fair value with unrealized gains and losses, net of
income taxes, reported as a separate component of equity. Accordingly, a
misclassification would have a direct effect on stockholders' equity. Sales or
reclassification as available for sale (except for certain permitted reasons)
of held to maturity securities may result in the reclassification of all such
securities to available for sale. Westfield Financial has never sold held to
maturity securities or reclassified such securities to available for sale other
than in specifically permitted circumstances. Westfield Financial does not
acquire securities or mortgage-backed securities for purposes of engaging in
trading activities.
Westfield Financial's general policy is to discontinue the accrual of interest
when principal or interest payments are delinquent 90 days or more, or earlier
if the loan is considered impaired. Any unpaid amounts previously accrued on
these loans are reversed from income. Subsequent cash receipts are applied to
the outstanding principal balance or to interest income if, in the judgment of
management, collection of principal balance is not in question. Loans are
returned to accrual status when they become current as to both principal and
interest and when subsequent performance reduces the concern as to the
collectibility of principal and interest. Loan fees and certain direct loan
origination costs are deferred, and the net fee or cost is recognized as an
adjustment to interest income over the estimated average lives of the related
loans.
Westfield Financial's methodology for assessing the allocation of the allowance
consists of two key components, which are a specific allowance for identified
problems or impaired loans and a formula allowance for the remainder of the
portfolio. Measurement of impairment can be based on present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
observable market price or the fair value of the collateral, if the loan is
collateral dependent. This evaluation is inherently subjective as it requires
material estimates that may be susceptible to significant change. The
allocation of the allowance is also reviewed by management based upon its
evaluation of then-existing economic and business conditions affecting
Westfield Financial's key lending areas and other conditions, such as new loan
products, credit quality trends (including trends in nonperforming loans
expected to result from existing conditions), collateral values, loan volumes
and concentrations, specific industry conditions within portfolio segments that
existed as of the balance sheet date and the impact that such conditions were
believed to have had on the collectibility of the loan portfolio. Although
management believes it has established and maintained the allowance for loan
losses at adequate levels, future adjustments may be necessary if economic,
real estate and other conditions differ substantially from the current
operating environment.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
Total assets increased $46.8 million to $1.0 billion at September 30, 2007 from
$996.8 million at December 31, 2006. Cash and cash equivalents decreased $101.5
million to $53.0 million at September 30, 2007 from $154.5 million at December
31, 2006. The decrease in cash and cash equivalents was the result of investing
offering proceeds in investment securities and loans.
Securities and mortgage-backed securities increased $116.0 million to $525.0
million at September 30, 2007 from $409.0 million at December 31, 2006. The
securities portfolio is primarily comprised of mortgage-backed securities,
which totaled $378.0 million at September 30, 2007, the majority of which were
issued by government-sponsored enterprises such as Fannie Mae. Privately issued
mortgage-backed securities comprised 10.2% of the mortgage-backed securities
portfolio at September 30, 2007, are rated AAA by Standard & Poors, and contain
no sub-prime collateral.
15
Debt securities issued by government-sponsored enterprises increased by $25.2
to $107.0 million at September 30, 2007 from $81.8 million at December 31,
2006. Securities issued by government-sponsored enterprises consist entirely of
bonds issued by the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation and the Federal Home Loan Bank. Westfield Financial
also invests in municipal bonds issued by cities and towns in Massachusetts and
are AAA rated by Moody's, Standard and Poor's, or Fitch, and the majority of
which are also independently insured. Municipal bonds were $33.0 million at
September 30, 2007 and $30.2 million at December 31, 2006. In addition,
Westfield Financial has investments in Federal Home Loan Bank stock and mutual
funds that invest only in securities allowed by the Office of Thrift
Supervision.
Net loans increased by $16.9 million to $402.1 million at September 30, 2007
from $385.2 million at December 31, 2006. This was primarily the result of an
increase in commercial and industrial loans and commercial real estate loans.
Commercial and industrial loans increased $10.7 million to $111.1 million at
September 30, 2007 from $100.4 million at December 31, 2006. Commercial real
estate loans increased $6.9 million to $181.4 million at September 30, 2007
from $174.5 million at December 31, 2006.
Residential real estate loans were $110.0 million at September 30, 2007 and
$109.9 million at December 31, 2006. Since September 2001, Westfield Bank has
referred substantially all of the originations of its residential real estate
loans to a third party mortgage company. Residential real estate borrowers
submit applications to Westfield Bank, but the loan is approved by and closed
on the books of the mortgage company. The third party mortgage company owns the
servicing rights and services the loans. Westfield Bank retains no residual
ownership interest in these loans.
Asset growth was funded primarily through a $48.0 million increase in Federal
Home Loan Bank borrowings, which totaled $103.0 million at September 30, 2007.
In addition, customer repurchase agreements increased $4.9 million to $22.8
million at September 30, 2007 from $17.9 million at December 31, 2006. A
customer repurchase agreement is an agreement by Westfield Bank to sell to and
repurchase from the customer an interest in specific securities issued by or
guaranteed by the United States Government. This transaction settles
immediately on a same day basis in immediately available funds. Interest paid
is commensurate with other products of equal interest and credit risk. At
September 30, 2007, all of Westfield Bank's customer repurchase agreements were
held by commercial customers.
Total deposits decreased $13.3 million to $614.2 million at September 30, 2007
from $627.5 million at December 31, 2006. The decrease in total deposits was
due to a decrease in money market accounts and time deposits, partially offset
by an increase in regular savings accounts. Money market accounts decreased
$12.9 million to $81.6 million at September 30, 2007. Time deposits decreased
$6.1 million to $367.9 million at September 30, 2006. These decreases were
partially offset by an increase of $6.5 million in regular savings accounts
which was fueled by a new product with a higher interest rate.
Stockholders' equity was $289.6 million at September 30, 2007 and $289.4
million at December 31, 2006 respectively, representing 27.8% and 29.0% of
total assets, respectively.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007
AND SEPTEMBER 30, 2006
General
Net income was $2.2 million, or $0.07 per diluted share, for the quarter ended
September 30, 2007 compared to $0.9 million, or $0.03 per diluted share, for
the same period in 2006. Net interest and dividend income increased $2.1
million to $7.6 million for the three months ended September 30, 2007.
16
Net Interest and Dividend Income
The following tables set forth the information relating to our average balance
at, and net interest income for, the three months ended September 30, 2007 and
2006 and reflect the average yield on assets and average cost of liabilities
for the periods indicated. Yields and costs are derived by dividing interest
income by the average balance of interest-earning assets and interest expense
by the average balance of interest-bearing liabilities for the periods shown.
Average balances are derived from actual daily balances over the periods
indicated. Interest income includes fees earned from making changes in loan
rates and terms and fees earned when real estate loans are prepaid or
refinanced. Interest earned on tax exempt assets is adjusted to a tax
equivalent basis to recognize the income tax savings which facilitates
comparison between taxable and tax-exempt assets.
Three Months Ended September 30,
--------------------------------
2007 2006
---- ----
Average Avg Yield/ Average Avg Yield/
Interest Balance Cost Interest Balance Cost
-------- ------- ---- -------- ------- ----
(Dollars in thousands)
Interest-Earning Assets
- -----------------------
Short-Term Investments $ 504 $ 38,780 5.20% $ 112 $ 8,853 5.06%
Investment Securities 6,372 510,771 4.99 4,274 374,301 4.57
Loans 6,984 408,256 6.84 6,533 390,701 6.69
------- -------- ------- --------
Total Interest-Earning Assets $13,860 $957,807 5.79% $10,919 $773,855 5.64%
======= ======== ======= ========
Interest-Bearing Liabilities
- ----------------------------
NOW Accounts $ 355 $ 80,935 1.75% $ 249 $ 73,356 1.36%
Savings Accounts 97 41,855 0.93 48 38,442 0.50
Money Market Accounts 341 83,217 1.64 402 105,114 1.53
Time Deposits 4,196 368,301 4.56 3,886 375,920 4.13
Customer Repurchase Agreements and
Borrowings 1,184 109,328 4.33 598 66,158 3.62
------- -------- ------- --------
Total Interest-Bearing Liabilities $ 6,173 $683,636 3.61% $ 5,183 $658,990 3.15%
======= ======== ======= ========
Net Interest Income/Interest Rate Spread $ 7,687 2.18% $ 5,736 2.49%
======= ==== ======= ====
Net Interest Margin 3.18% 2.94%
==== ====
1) Net interest margin represents tax equivalent net interest and dividend income as a percentage of average interest
earning assets.
The following table shows how changes in interest rates and changes in the
volume of interest-earning assets and interest-bearing liabilities have
affected Westfield Financial's interest income and interest expense during the
periods indicated. Information is provided in each category with respect to:
o interest income changes attributable to changes in volume (changes
in volume multiplied by prior rate);
o interest income changes attributable to changes in rate (changes in
rate multiplied by current volume); and
o the net change.
The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
17
Three Months Ended September 30, 2007
Compared to September 30, 2006
Increase (decrease) due to:
Interest-Earning Assets Volume Rate Net
- ----------------------- ------ ---- ---
(Dollars in thousands)
Short-Term Investments $ 379 $ 13 $ 392
Investment Securities 1,558 540 2,098
Loans 294 157 451
------ ---- ------
Net Change in Income on
Interest-Earning Assets 2,231 710 2,941
------ ---- ------
Interest-Bearing Liabilities
- ----------------------------
NOW Accounts 26 80 106
Savings Accounts 4 45 49
Money Market Accounts (84) 23 (61)
Time Deposits (79) 389 310
Customer Repurchase Agreements and
Borrowings 390 196 586
------ ---- ------
Net Change in Expense on
Interest-Bearing Liabilities 257 733 990
------ ---- ------
Net Change in Interest Income $1,974 $(23) $1,951
====== ==== ======
The net interest margin, on a tax equivalent basis, was 3.18% for the three
months ended September 30, 2007 compared to 2.94% for the same period in 2006.
The increase in net interest income was mainly due to a $183.9 million increase
in average earning assets as a result of funds raised in the second step stock
offering. Average earning assets were $957.8 million for the three months ended
September 30, 2007 compared to $773.9 for the same period in 2006. As a result,
interest and dividend income increased $3.1 million to $13.8 million for the
nine months ended September 30, 2007 from $10.7 million for same period in
2006. The yield of interest-earning assets, on a tax equivalent basis,
increased 15 basis points to 5.79% for the three months ended September 30,
2007 from 5.64% for same period in 2006.
The increase in interest income was partially offset by an increase of $990,000
in interest expense. The average cost of interest-bearing liabilities increased
46 basis points to 3.61% for the three months ended September 30, 2007 from
3.15% for same period in 2006. The increase in the average cost of
interest-bearing liabilities was primarily due to the rising interest rate
environment.
Provision for Loan Losses
The appropriations of the allowance is reviewed by management based upon its
evaluation of then-existing economic and business conditions affecting the key
lending areas of Westfield Bank and other conditions, such as new loan
products, credit quality trends (including trends in nonperforming loans
expected to result from existing conditions), collateral values, loan volumes
and concentrations, specific industry conditions within portfolio segments that
existed as of the balance sheet date and the impact that such conditions were
believed to have had on the collectibility of the loan portfolio.
18
The amount that Westfield Bank provided for the provision for loan losses
during the three months ended September 30, 2007 was based upon the changes
that occurred in the loan portfolio during that same period. The changes in the
loan portfolio, described in detail below, include a decrease in net charge
offs, tempered by an increase in nonperforming loans and an increase in
commercial real estate, residential real estate, and commercial and industrial
loans. After evaluating these factors, Westfield Bank provided $50,000 for loan
losses for the three months ended September 30, 2007, and for the same period
in 2006. The allowance was $5.8 million at September 30, 2007 and $5.7 million
at June 30, 2007. The allowance for loan losses was 1.42% of total loans at
both September 30, 2007 and June 30, 2007.
For the three months ended September 30, 2007, Westfield Bank recorded net
recoveries of $69,000 compared to net charge-offs of $57,000 for the three
months ended September 30, 2006. The 2007 period was comprised of recoveries of
$84,000 for the three months ended September 30, 2007, partially offset by
charge-offs of $14,000 for the same period. The 2006 period was comprised of
charge-offs of $107,000 for the three months ended September 30, 2006,
partially offset by recoveries of $50,000 for the same period.
Nonperforming loans increased $479,000 to $1.5 million at September 30, 2007
from $1.0 at June 30, 2007. Nonperforming residential real estate loans
increased $273,000 to $1.2 million at September 30, 2007 from $959,000 at June
30, 2006. The majority of nonperforming residential real estate loans have
balances under $80,000, are collateralized by first liens and are seasoned,
i.e. originated more than five years ago.
Nonperforming commercial and industrial loans increased $206,000 to $249,000 at
September 30, 2007 from $43,000 at June 30, 2007. The increase related to
commercial and industrial loans was due to a single customer relationship.
Commercial real estate loans increased by $8.6 million and residential real
estate mortgages increased by $2.5 million during the quarter ended September
30, 2007. At September 30, 2007, commercial and industrial loans decreased $3.5
million to $111.1 million compared to June 30, 2007. Westfield Bank considers
these types of loans to contain more credit risk and market risk than both
commercial real estate loans and conventional residential real estate
mortgages.
Although management believes it has established and maintained the allowance
for loan losses at adequate levels, future adjustments may be necessary if
economic, real estate and other conditions differ substantially from the
current operating environment.
Noninterest Income
Noninterest income increased $471,000 to $964,000 for the three months ended
September 30, 2007 from $493,000 in the same period in 2006. The 2006 results
included a net loss of $378,000 on the sale of fixed assets, which primarily
was the result of the sale of a building which housed a former Westfield Bank
branch. There were no net gains or losses on the sale of fixed assets in the
comparable 2007 period.
Income from bank-owned life insurance increased $130,000 to $331,000 for the
three months ended September 30, 2007 compared to $201,000 in the same period
in 2006. This was primarily the result of the purchase of an additional $10.0
million of bank-owned life insurance in the first quarter of 2007.
Net checking account processing fee income decreased $88,000 to $390,000 for
the three months ended September 30, 2007 compared to $478,000 for the same
period in 2006. This was primarily the result of a decrease in fees collected
from customers who overdraw their checking accounts.
19
Noninterest Expense
Noninterest expense for the three months ended September 30, 2007 was $5.4
million compared to $4.9 million for the same period in 2006. Salaries and
benefits increased $470,000 to $3.5 million for the three months ended
September 30, 2007 compared to $3.0 million for the same period in 2006.
Salaries expense increased $269,000 as a result of hiring new employees and
normal increases in employee salaries. Much of the new hiring was associated
with a new Westfield Bank branch which opened for business during the second
quarter of 2007. Expenses related to share-based compensation increased
$226,000 as a result of new grants of restricted stock and stock options in
2007, along with expenses related to the 2007 Employee Stock Ownership Plan.
Professional services expense increased $101,000 to $336,000 for the three
months ended September 30, 2007 compared to $235,000 for the same period in
2006. This was primarily the result of expenses related to corporate legal
matters and fees paid to an industry consultant.
The increase in professional services expense was offset by a decrease in
charitable contributions of $101,000 to $15,000 for the three months ended
September 30, 2007 compared to $116,000 for the same period in 2006. Management
authorized a larger portion of the 2007 annual expenditures for charitable
contributions in the first six months of the year, whereas in 2006, a greater
portion was paid in the third quarter.
Income Taxes
For the three months ended September 30, 2007, Westfield Financial had a tax
provision of $970,000 compared to $236,000 for the same period in 2006. The
effective tax rate was 30.9% for the three months ended September 30, 2007 and
21.3% for the same period in 2006.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
AND SEPTEMBER 30, 2006
General
Net income was $6.1 million, or $0.20 per diluted share, for the nine months
ended September 30, 2007 as compared to $3.4 million, or $0.11 per diluted
share, for the same period in 2006. Net interest and dividend income was $22.5
million for the nine months ended September 30, 2007, compared to $17.2 million
for the same period in 2006.
Net Interest and Dividend Income
The following tables set forth the information relating to our average balance
at, and net interest income for, the nine months ended September 30, 2007 and
2006 and reflect the average yield on assets and average cost of liabilities
for the periods indicated. Yields and costs are derived by dividing interest
income by the average balance of interest-earning assets and interest expense
by the average balance of interest-bearing liabilities for the periods shown.
Average balances are derived from actual daily balances over the periods
indicated. Interest income includes fees earned from making changes in loan
rates and terms and fees earned when real estate loans are prepaid or
refinanced. Interest earned on tax-exempt assets is adjusted to a tax
equivalent basis to recognize the income tax savings which facilitates
comparison between taxable and tax-exempt assets.
20
Nine Months Ended September 30,
-------------------------------
2007 2006
---- ----
Average Avg Yield/ Average Avg Yield/
Interest Balance Cost Interest Balance Cost
-------- ------- ---- -------- ------- ----
(Dollars in thousands)
Interest-Earning Assets
- -----------------------
Short-Term Investments $ 2,535 $ 64,221 5.26% $ 527 $ 15,184 4.63%
Investment Securities 17,421 477,461 4.86 12,225 366,510 4.45
Loans 20,038 393,708 6.79 19,115 386,140 6.60
------- -------- ------- --------
Total Interest-Earning Assets $39,994 $935,390 5.70 $31,867 $767,834 5.53
======= ======== ======= ========
Interest-Bearing Liabilities
- ----------------------------
NOW Accounts $ 1,016 $ 80,304 1.69 $ 632 $ 72,047 1.17
Savings Accounts 204 40,033 0.68 148 39,866 0.49
Money Market Accounts 1,035 87,374 1.58 1,308 113,347 1.54
Time Deposits 12,453 371,695 4.47 10,372 365,204 3.79
Customer Repurchase Agreements and
Borrowings 2,435 80,809 4.02 1,575 61,931 3.39
------- -------- ------- --------
Total Interest-Bearing Liabilities $17,143 $660,215 3.46 $14,035 $652,395 2.87
======= ======== ======= ========
Net Interest Income/Interest Rate Spread $22,851 2.24% $17,832 2.66%
======= ==== ======= ====
Net Interest Margin 3.27% 3.11%
==== ====
1) Net interest margin represents tax equivalent net interest and dividend income as a percentage of average interest
earning assets.
The following table shows how changes in interest rates and changes in the
volume of interest-earning assets and interest-bearing liabilities have
affected Westfield Financial's interest income and interest expense during the
periods indicated. Information is provided in each category with respect to:
o interest income changes attributable to changes in volume (changes
in volume multiplied by prior rate);
o interest income changes attributable to changes in rate (changes in
rate multiplied by current volume); and
o the net change.
The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
21
Nine Months Ended September 30, 2007
Compared to September 30, 2006
Increase (decrease) due to:
Interest-Earning Assets Volume Rate Net
- ----------------------- ------ ---- ---
(Dollars in thousands)
Short-Term Investments $1,702 $ 306 $2,008
Investment Securities 3,701 1,495 5,196
Loans 375 548 923
------ ------ ------
Net Change in Income on
Interest-Earning Assets 5,778 2,349 8,127
------ ------ ------
Interest-Bearing Liabilities
- ----------------------------
NOW Accounts 72 312 384
Savings Accounts 1 55 56
Money Market Accounts (300) 27 (273)
Time Deposits 184 1,897 2,081
Customer Repurchase Agreements and
Borrowings 480 380 860
------ ------ ------
Net Change in Expense on
Interest-Bearing Liabilities 437 2,671 3,108
------ ------ ------
Net Change in Interest Income $5,341 $ (322) $5,019
====== ====== ======
The net interest margin, on a tax equivalent basis, was 3.27% for the nine
months ended September 30, 2007 compared to 3.11% for the same period in 2006.
The increase in net interest income was mainly due to a $167.6 million increase
in average earning assets as a result of funds raised in the second step stock
offering. Average earning assets were $935.4 million for the nine months ended
September 30, 2007 compared to $767.8 for the same period in 2006. As a result,
interest and dividend income increased 8.4 million to $39.7 million for the
nine months ended September 30, 2007 from $31.3 million for same period in
2006. The yield of interest-earning assets, on a tax equivalent basis,
increased 17 basis points to 5.70% for the nine months ended September 30, 2007
from 5.53% for same period in 2006.
The increase in interest income was partially offset by an increase of $3.1
million in interest expense. The average cost of interest-bearing liabilities
increased 59 basis points to 3.46% for the nine months ended September 30, 2007
from 2.87% for same period in 2006. The increase in the average cost of
interest-bearing liabilities was primarily due to an increase in the cost of
time deposits resulting from the rising interest rate environment.
22
Provision for Loan Losses
The amount that Westfield Bank provided for the provision for loan losses
during the nine months ended September 30, 2007 was based upon the changes that
occurred in the loan portfolio during that same period. The changes in the loan
portfolio, described in detail below, include a decrease in net charge offs,
tempered by an increase in commercial and industrial loans and commercial real
estate loans and an increase in nonperforming loans. After evaluating these
factors, Westfield Bank provided $225,000 for loan losses for the nine months
ended September 30, 2007, compared to $325,000 for the same period in 2006. The
allowance was $5.8 million at September 30, 2007 and $5.4 million at December
31, 2006. The allowance for loan losses was 1.42% of total loans at September
30, 2007 and 1.39% at December 31, 2006.
For the nine months ended September 30, 2007, Westfield Bank recorded net
recoveries of $131,000 compared to net charge-offs of $402,000 for the nine
months ended September 30, 2006. The 2007 period was comprised of recoveries of
$190,000 for the nine months ended September 30, 2007, partially offset by
charge-offs of $59,000 for the same period. The 2006 period was comprised of
charge-offs of $570,000 for the nine months ended September 30, 2006, partially
offset by recoveries of $168,000 for the same period.
Nonperforming loans increased $458,000 to $1.5 million at September 30, 2007
from $1.0 million at December 31, 2006. Nonperforming residential real estate
loans increased $326,000 to $1.2 million at September 30, 2007 from $907,000 at
December 31, 2006. The majority of nonperforming residential real estate loans
have balances under $80,000, are collateralized by first liens and are
seasoned, i.e. originated more than five years ago.
Nonperforming commercial and industrial loans increased $136,000 to $249,000 at
September 30, 2007 from $113,000 at December 31, 2006. The increase related to
commercial and industrial loans was due to a single customer relationship.
At September 30, 2007, commercial and industrial loans increased $10.7 million
to $111.1 million compared to December 31, 2006. Westfield Bank considers these
types of loans to contain more credit risk and market risk than both commercial
real estate loans and conventional residential real estate mortgages.
Commercial real estate loans increased by $6.9 million the nine months ended
September 30, 2007.
Noninterest Income
Noninterest income increased $526,000 to $2.8 million for the nine months ended
September 30, 2007 from $2.2 million in the same period in 2006. The 2006
results included a net loss of $378,000 on the sale of fixed assets, which
primarily was the result of the sale of a building which housed a former
Westfield Bank branch. There were no net gains or losses on the sale of fixed
assets in the comparable 2007 period.
Income from bank-owned life insurance increased $328,000 to $923,000 for the
nine months ended September 30, 2007 compared to $595,000 in the same period in
2006. This was primarily the result of the purchase of an additional $10.0
million of bank-owned life insurance in the first quarter of 2007.
Net checking account processing fee income decreased $213,000 to $1.2 million
for the nine months ended September 30, 2007 compared to $1.4 million for the
same period in 2006. This was primarily the result of a decrease in fees
collected from customers who overdraw their checking accounts.
23
Noninterest Expense
Noninterest expense for the nine months ended September 30, 2007 was $16.2
million compared to $14.6 million for the same period in 2006. Salaries and
benefits increased $1.1 million to $10.1 million for the nine months ended
September 30, 2007 compared to $9.0 million for the same period in 2006.
Salaries expense increased $785,000 as a result of hiring new employees and
normal increases in employee salaries. Much of the new hiring was associated
with a new Westfield Bank branch which opened for business during the second
quarter of 2007. Expenses related to share-based compensation increased
$528,000 as a result of new grants of restricted stock and stock options in
2007, along with expenses related to the 2007 Employee Stock Ownership Plan.
Professional services expense increased $258,000 to $1.1 million for the nine
months ended September 30, 2007 compared to $823,000 for the same period in
2006. This was primarily the result of expenses related to corporate legal
matters and fees paid to an industry consultant.
Advertising and marketing expense increased $183,000 to $565,000 for the nine
months ended September 30, 2007 compared to $382,000 for the same period in
2006. Management increased expenditures in this area to promote the Bank's
services to commercial customers.
Income Taxes
For the nine months ended September 30, 2007, Westfield Financial had a tax
provision of $2.7 million compared to $1.1 million for the same period in 2006.
The effective tax rate was 30.8% for the nine months ended September 30, 2007
and 24.4% for the same period in 2006.
LIQUIDITY AND CAPITAL RESOURCES
The term "liquidity" refers to Westfield Financial's ability to generate
adequate amounts of cash to fund loan originations, loan purchases, withdrawals
of deposits and operating expenses. Westfield Financial's primary sources of
liquidity are deposits, scheduled amortization and prepayments of loan
principal and mortgage backed securities, maturities and calls of investment
securities and funds provided by operations. Westfield Bank also can borrow
funds from the Federal Home Loan Bank based on eligible collateral of loans and
securities. Westfield Bank's maximum additional borrowing capacity from the
Federal Home Loan Bank at September 30, 2007 was approximately $10.7 million.
Liquidity management is both a daily and long-term function of business
management. The measure of a company's liquidity is its ability to meet its
cash commitments at all times with available cash or by conversion of other
assets to cash at a reasonable price. Loan repayments and maturing investment
securities are a relatively predictable source of funds. However, deposit flow,
calls of investment securities and repayments of loans and mortgage-backed
securities are strongly influenced by interest rates, general and local
economic conditions and competition in the marketplace. These factors reduce
the predictability of the timing of these sources of funds. Management believes
that Westfield Financial has sufficient liquidity to meet its current operating
needs.
At September 30, 2007, Westfield Financial exceeded each of the applicable
regulatory capital requirements. As of September 30, 2007, the most recent
notification from the Office of Thrift Supervision (the "OTS") categorized
Westfield Bank as "well capitalized" under the regulatory framework for prompt
corrective action. To be categorized as "well capitalized," Westfield Bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios
as set forth in the following table. There are no conditions or events since
that notification that management believes have changed Westfield Bank's
category. Westfield Financial's and Westfield Bank's actual capital ratios as
of September 30, 2007 are also presented in the table.
24
Minimum
To Be Well
Minimum Capitalized
For Capital Under Prompt
Adequacy Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
September 30, 2007
Westfield Financial, Inc.
Total Capital (to Risk Weighted Assets):
Consolidated $295,127 51.93% $45,469 8.00% N/A -
Bank 215,809 39.13 44,118 8.00 $55,147 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 289,334 50.91 22,734 4.00 N/A -
Bank 210,016 38.08 22,059 4.00 33,088 6.00
Tier 1 Capital (to Adjusted Total Assets):
Consolidated 289,334 27.74 41,728 4.00 N/A -
Bank 210,016 21.74 38,649 4.00 48,311 5.00
Tangible Equity (to Tangible Assets):
Consolidated N/A - N/A - N/A -
Bank 210,016 21.74 19,324 2.00 N/A -
December 31, 2006
Total Capital (to Risk Weighted Assets):
Consolidated $295,404 55.39% $42,662 8.00% N/A -
Bank 119,266 22.70 42,029 8.00 $52,536 10.00%
Tier 1 Capital (to Risk Weighted Assets): -
Consolidated 289,967 54.37 21,331 4.00 N/A -
Bank 113,856 21.67 21,014 4.00 31,522 6.00
Tier 1 Capital (to Adjusted Total Assets):
Consolidated 289,967 29.07 39,905 4.00 N/A -
Bank 113,856 11.88 38,327 4.00 47,908 5.00
Tangible Equity (to Tangible Assets):
Consolidated N/A - N/A - N/A -
Bank 113,856 11.88 19,163 2.00 N/A -
See the "Consolidated Statements of Cash Flows" in the Consolidated Financial
Statements included in this Form 10-Q for the sources and uses of cash flows
for operating, investing, and financing activities for the nine months ended
September 30, 2007 and September 30, 2006.
Westfield Bank also has outstanding, at any time, a significant number of
commitments to extend credit and provide financial guarantees to third parties.
These arrangements are subject to strict credit control assessments. Guarantees
specify limits to Westfield Bank's obligations. Because many commitments and
almost all guarantees expire without being funded in whole or in part, the
contract amounts are not estimates of future cash flows.
25
Westfield Bank is obligated under leases for certain of its branches and
equipment. A summary of lease obligations and credit commitments at September
30, 2007 is shown below:
After 1 Year After 3 Years
Within but Within but Within After
1 Year 3 Years 5 Years 5 Years Total
(In thousands)
LEASE OBLIGATIONS
Operating lease obligations $ 369 $ 735 $ 676 $ 6,830 $ 8,610
======== ======= ======= ======= ========
BORROWINGS
Federal Home Loan Bank $ 28,000 $50,000 $20,000 $ 5,000 $103,000
======== ======= ======= ======= ========
CREDIT COMMITMENTS
Available lines of credit $ 49,608 $ - $ - $13,179 $ 62,787
Other loan commitments 46,515 5,435 - - 51,950
Letters of credit 7,659 - - 588 8,247
-------- ------- ------- ------- --------
Total credit commitments $103,782 $ 5,435 $ - $13,767 $122,984
======== ======= ======= ======= ========
Grand total $132,151 $56,170 $20,676 $25,597 $234,594
======== ======= ======= ======= ========
OFF-BALANCE SHEET ARRANGEMENTS
Westfield Financial does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on Westfield
Financial's condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources
that is material to investors.
ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative measures established by regulation to ensure capital adequacy
require Westfield Financial and Westfield Bank to maintain minimum amounts and
ratios (set forth in the table above) of total and Tier I capital to risk
weighted assets and to average assets. Management believes, as of September 30,
2007, that Westfield Financial and Westfield Bank met all capital adequacy
requirements to which they were subject. As of September 30, 2007, the most
recent notification from the OTS categorized Westfield Bank as well capitalized
under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, Westfield Bank must maintain minimum
total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no
conditions or events since that notification that management believes have
changed Westfield Bank's category.
Management uses a simulation model to monitor interest rate risk. This model
reports the net interest income at risk primarily under seven different
interest rate change environments. Specifically, net interest income is
measured in one scenario that assumed no change in interest rates, and six
scenarios where interest rates increase or decrease 100, 200, and 300 basis
points, respectively, from current rates over the one year time period
following the current consolidated financial statement. Income from tax-exempt
assets is calculated on a fully taxable equivalent basis.
26
The changes in interest income and interest expense due to changes in interest
rates reflect the interest sensitivity of our interest earning assets and
interest bearing liabilities. For example, in a rising interest rate
environment, the interest income from an adjustable rate loan will increase
depending on its repricing characteristics while the interest income from a
fixed loan would not increase until the loan was repaid and reinvested or
loaned out at a higher interest rate.
The tables below set forth for the twelve months ended September 30, 2008 the
estimated changes in net interest and dividend income that would result from
incremental changes in interest rates over the applicable period.
For the Twelve Months Ending September 30, 2008
(Dollars in thousands)
-----------------------------------------------
Changes in Net Interest
Interest Rates and Dividend
(Basis Points) Income % Change
-------------- ------------ --------
300 $34,182 3.5%
200 33,678 2.0
100 33,473 1.3
0 33,031 0.0
-100 32,544 -1.5
-200 31,226 -5.5
-300 29,268 -11.4
Management believes that there have been no significant changes in market risk
since December 31, 2006.
The income simulation analysis was based upon a variety of assumptions. These
assumptions include but are not limited to balance sheet growth, asset mix,
prepayment speeds, the timing and level of interest rates, and the shape of the
yield curve. As market conditions vary from the assumptions in the income
simulation analysis, actual results will differ. As a result, the income
simulation analysis does not serve as a forecast of net interest income, nor do
the calculations represent any actions that management may undertake in
response to changes in interest rates.
ITEM 4:
CONTROLS AND PROCEDURES
Management, including Westfield Financial's Chairman and Chief Executive
Officer and Westfield Financial's Chief Financial Officer, has evaluated the
effectiveness of Westfield Financial's disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of the end of the
period covered by this report. Based upon the evaluation, the Chairman and
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures were effective to ensure that information
required to be disclosed in the reports Westfield Financial files and submits
under the Exchange Act is (i) recorded, processed, summarized and reported as
and when required and (ii) accumulated and communicated to Westfield
Financial's management, including Westfield Financial's principal executive
officer and principal accounting officer, as appropriate, to allow timely
decisions regarding required disclosure.
There have been no changes in the Westfield Financial's internal control over
financial reporting identified in connection with the evaluation that occurred
during Westfield Financial's last fiscal quarter that has materially affected,
or that is reasonably likely to materially affect, Westfield Financial's
internal control over financial reporting.
27
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A: RISK FACTORS
There have been no material changes to the risk factors previously disclosed in
Westfield Financial's Form 10-K for the year ended December 31, 2006.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES USE OF PROCEEDS
There were no purchases made by Westfield Financial of its common stock during
the three months ended September 30, 2007.
There were no sales by Westfield Financial of unregistered securities during
the three months ended September 30, 2007.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
a. None
b. None
28
ITEM 6. EXHIBITS
The following exhibits are furnished with this report:
Exhibit Description
- ------- -----------------------------------------------------------------
2.1 Amended and Restated Plan of Conversion and Stock Issuance of
Westfield Mutual Holding Company, Westfield Financial, Inc. and
Westfield Bank (1)
3.1 Articles of Organization of Westfield Financial, Inc.(2)
3.2 Bylaws of Westfield Financial, Inc. (2)
4.1 Form of Stock Certificate of Westfield Financial, Inc. (1)
10.1 Form of Employee Stock Ownership Plan of Westfield Financial,
Inc. (3)
10.2 Amendments to the Employee Stock Ownership Plan of Westfield
Financial, Inc. (4)
10.3 Form of Director's Deferred Compensation Plan (5)
10.4 The 401(k) Plan adopted by Westfield Bank (6)
10.5 Amended and Restated Benefit Restoration Plan of Westfield
Financial, Inc. (7)
10.6 Form of Amended and Restated Deferred Compensation Agreement with
Donald A. Williams (5)
10.7 Amended and Restated Employment Agreement between Donald A.
Williams and Westfield Bank (7)
10.8 Amended and Restated Employment Agreement between Michael J.
Janosco, Jr. and Westfield Bank (7)
10.9 Amended and Restated Employment Agreement between James C. Hagan
and Westfield Bank (7)
10.10 Amended and Restated Employment Agreement between Donald A.
Williams and Westfield Financial, Inc. (7)
10.11 Amended and Restated Employment Agreement between Michael J.
Janosco, Jr. and Westfield Financial, Inc. (7)
10.12 Amended and Restated Employment Agreement between James C. Hagan
and Westfield Financial, Inc. (7)
10.13 Form of Amended and Restated Change in Control Agreement by and
among certain officers, Westfield Financial, Inc. and Westfield
Bank. (7)
10.14 Agreement between Westfield Bank and Village Mortgage Company (1)
31.1 Rule 13a - 14(a)/15d - 14(a) Certifications
32.1 Section 1350 Certifications
(1) Incorporated by reference to the Registration Statement No. 333-137024 on
Form S-1 filed with the Securities and Exchange Commission on August 31,
2006, as amended.
(2) Incorporated by reference to the Form 8-K filed with the Securities and
Exchange Commission on January 5, 2007.
(3) Incorporated herein by reference to the Registration Statement No.
333-68550 on Form S-1 filed with the Securities and Exchange Commission
on August 28, 2001, as amended.
(4) Incorporated by reference to the Annual Report on Form 10-K for the year
ended December 31, 2002 filed with the Securities and Exchange Commission
on March 31, 2003.
(5) Incorporated by reference to the Form 8-K filed with the Securities and
Exchange Commission on December 22, 2005.
(6) Incorporated herein by reference to the Post-Effective Amendment No. 1 to
the Registration Statement No. 333-73132 on Form S-8 filed with the
Securities and Exchange Commission on April 28, 2006.
(7) Incorporated by reference to the Form 8-K filed with the Securities and
Exchange Commission on October 25, 2007.
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Westfield Financial, Inc.
(Registrant)
By: /s/ Donald A. Williams
------------------------------------------
Donald A. Williams
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Michael J. Janosco, Jr.
------------------------------------------
Michael J. Janosco, Jr.
Vice President and Chief Financial Officer
(Principal Accounting Officer)
November 9, 2007
30