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WBB > SEC Filings for WBB > Form 10-Q on 15-May-2013All Recent SEC Filings

Show all filings for WESTBURY BANCORP, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for WESTBURY BANCORP, INC.


15-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This Quarterly Report contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "believe," "contemplate," "continue," "intend," "target" and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

our ability to manage our operations under the current adverse economic conditions nationally and in our market area;

adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values);

significant increases in our delinquencies and loan losses, including as a result of our inability to resolve classified assets, changes in the underlying cash flows of our borrowers, and management's assumptions in determining the adequacy of the allowance for loan losses;

credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

our ability to comply with the terms of agreements with our regulators, including business and capital plans submitted to our regulators, and the individual minimum capital requirement imposed by the OCC, and our ability to successfully conduct our operations while subject to regulatory restrictions on our activities;

competition among depository and other financial institutions;

our success in increasing our commercial business, commercial real estate and multi-family lending while improving our asset quality;

our success in introducing new financial products;


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our ability to attract and maintain deposits;

changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

changes in consumer spending, borrowing and savings habits;

further declines in the yield on our assets resulting from the current low interest rate environment;

risks related to a high concentration of loans secured by real estate located in our market area;

the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

our ability to enter new markets successfully and capitalize on growth opportunities;

changes in consumer spending, borrowing and savings habits;

changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, and changes in the level of government support of housing finance;

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

changes in our organization, compensation and benefit plans;

risks and costs associated with operating as a publicly traded company;

changes in the financial condition or future prospects of issuers of securities that we own; and

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.


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Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in Westbury Bancorp, Inc.'s Prospectus, dated February 11, 2013, as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on February 21, 2013.

Comparison of Financial Condition at March 31, 2013 and September 30, 2012

Total Assets. Total assets increased by $57.7 million, or 11.0%, to $584.2 million at March 31, 2013 from $526.5 million at September 30, 2012. The increase was primarily the result of increases in cash and cash equivalents of $81.2 million, offset by decreases in loans of $21.8 million and real estate held for investment of $2.2 million. Cash and cash equivalents included $59.5 million of cash received in conjunction with subscriptions in the Company's mutual-to-stock conversion which had not been completed at March 31, 2013.

Net Loans. Net loans decreased by $21.8 million, or 5.8%, to $354.1 million at March 31, 2013 from $375.9 million at September 30, 2012. During the six months ended March 31, 2013 we originated $77.6 million of one- to four-family residential real estate loans, including $69.9 million of one to four family loans for sale in the secondary market, and we sold $72.7 million of one- to four-family loans at a premium during the six months ended March 31, 2013. Single family loans decreased $12.9 million, or 8.4%, commercial real estate and multi-family real estate loans decreased $7.4 million, or 4.3%, and home equity lines of credit decreased $3.0 million, or 15.5%, during the six month period ended March 31, 2013. Decreases in net loans reflect strong competition for commercial business, commercial real estate and multi-family loans in our market area in the current low interest rate environment and continued refinancing from adjustable to fixed rate loans by residential loan customers, as well as our decision to manage loan growth in order to improve capital ratios and reduce expenses.

Investment Securities. Investment securities available for sale increased $2.5 million, or 3.7%, to $67.0 million at March 31, 2013 from $64.5 million at September 30, 2012 as a result of our decision to manage our balance sheet to improve capital ratios and reduce expenses. Mortgage-backed securities decreased $10.5 million, or 25.4%, to $30.8 million at March 31, 2013 from $41.3 million at September 30, 2012, U.S. government and agency securities increased $5.2 million, or 173.3%, to $8.2 million from $3.0 million at September 30, 2012, and municipal securities increased $7.6 million, or 37.4%, to $27.9 million at March 31, 2013 from $20.3 million at September 30, 2012. Net unrealized gain on securities declined $732,000 from September 30, 2012 to March 31, 2013, reflecting the market values of the remaining securities after an increase in market interest rates during the six month period and the recognition of gains on sale of investment securities of $232,000 during the six month period. At March 31, 2013, investment securities classified as available-for-sale consisted entirely of U.S. government and agency securities, U.S. government agency collateralized mortgage obligations, U.S. government agency residential mortgage-backed securities, and municipal securities with a focus on suitable government-sponsored securities to augment risk-based capital.

Foreclosed Real Estate. Foreclosed real estate held for sale decreased $738,000, or 27.1% to $2.0 million at March 31, 2013 from $2.7 million at September 30, 2012, as we sold $1.7 million of foreclosed properties, foreclosed on $1.1 million of non-performing loans and recorded valuation adjustments of $355,000 during the six month period. At March 31, 2013 our foreclosed real estate included primarily one- to four-family residential real estate, multi-family and commercial real estate properties, the largest of which was a single family home with a carrying value of $571,500.

Bank Owned Life Insurance. Bank-owned life insurance ("BOLI"), which provides us with a funding source for our employee benefit plan obligations, increased $213,000, to $12.2 million at March


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31, 2013 from $11.9 million at September 30, 2012. We are the beneficiary and owner of the BOLI policies, and as such, the investment is carried at the cash surrender value of the underlying policies. BOLI also generally provides us other income that is non-taxable. Regulations generally limit our investment in BOLI to 25% of our tier 1 capital plus our allowance for loan losses. At March 31, 2013, this limit was $11.9 million, and we had invested $12.2 million in BOLI at that date. We exceeded regulatory limitations as a result of a reduction in capital caused by the loss incurred in the three month period ended December 31, 2011. Subsequent to March 31, 2013, we completed our mutual-to-stock conversion, and the additional capital raised in the stock offering resulted in our compliance with regulatory limitations.

Deposits. Deposits decreased $9.7 million, or 2.1%, to $457.1 million at March 31, 2013 from $466.8 million at September 30, 2012. Our core deposits, which we consider to be our non-interest bearing and interest bearing checking accounts, passbook and statement savings accounts, and variable rate money market accounts increased $843,000, or 0.2%, to $358.7 million at March 31, 2013 from $357.8 million at September 30, 2012. Certificates of deposit and other time deposits decreased $10.5 million, or 9.6%, to $98.5 million at March 31, 2013 from $108.9 million at September 30, 2012. The decrease in certificates of deposit is attributed primarily to customers' reinvestment decisions resulting from the decline in interest rates.

Other Liabilities. Notes payable were unchanged at $1.3 million at March 31, 2013 and September 30, 2012. Subsequent to March 31, 2013, we used a portion of the proceeds from our stock offering to pay down all principal and interest outstanding on notes payable. Other liabilities increased $71.2 million or 1453.1%, to $76.1 million at March 31, 2013 from $4.9 million at September 30, 2012, reflecting $68.3 million in stock subscriptions pending in the mutual-to-stock conversion completed subsequent to March 31, 2013.

Total Equity. Total equity increased $722,000, or 1.5%, to $47.6 million at March 31, 2013 from $46.9 million at September 30, 2012. The increase resulted primarily net income of $1.2 million during the six months ended March 31, 2013, offset by a decline of $445,000 in net unrealized gains on securities available for sale.


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Delinquent Loans



The following table sets forth our loan delinquencies, including non-accrual
loans, by type and amount at the dates indicated.



                                       Loans Delinquent For
                        30-59 Days         60-89 Days       90 Days and Over           Total
                     Number   Amount    Number   Amount     Number     Amount    Number    Amount
                                                (Dollars in thousands)
At March 31, 2013:
Real estate loans:
One- to
four-family              16   $ 1,606        1   $    98         36    $ 2,886       53   $  4,590
Multi-family              -         -        -         -          1        254        1        254
Commercial                -         -        1       972          7      2,074        8      3,046
Construction and
land                      -         -        -         -          1        247        1        247
Total real estate        16     1,606        2     1,070         45      5,461       63      8,137
Commercial
business loans            1        17        -         -          2         84        3        101
Consumer loans:
Home equity lines
of credit                 4        33        -         -          7        413       11        446
Education                11        93        6       111         23        254       40        458
Automobile                -         -        -         -          2          1        2          1
Other consumer
loans                     1         1        1         2          2          6        4          9
Total consumer
loans                    16       127        7       113         34        674       57        914
Total                    33   $ 1,750        9   $ 1,183         81    $ 6,219      123   $  9,152

At September 30,
2012:
Real estate loans:
One- to
four-family              22   $ 1,747       11   $ 1,112         30    $ 3,034       63   $  5,893
Multi-family              -         -        -         -          -          -        -          -
Commercial                -         -        1       169          5      2,376        6      2,545
Construction and
land                      1        53        -         -          1        108        2        161
Total real estate        23     1,800       12     1,281         36      5,518       71      8,599
Commercial
business loans            4       153        -         -          -          -        4        153
Consumer loans:
Home equity lines
of credit                 7       453        3       248         11        288       21        989
Education                 7        61        8        85         10        114       25        260
Automobile                3         5        2         5          2          3        7         13
Other consumer
loans                     -         -        -         -          2          6        2          6
Total consumer
loans                    17       519       13       338         25        411       55      1,268
Total                    44   $ 2,472       25   $ 1,619         61    $ 5,929      130   $ 10,020

The decrease in delinquent loans at March 31, 2013 compared to September 30, 2012 is primarily attributed to a decrease in one-to-four family loan delinquencies of $1.3 million.


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Classified Assets



We had classified or held as special mention the following assets as of the date
indicated:



                                                             At March 31,      At September 30,
                                                                 2013                2012
                                                                       (In thousands)
Classified Loans:
Loss                                                                     -                     -
Doubtful                                                                 -                     -
Substandard - performing:
Real estate loans:
One- to four-family                                         $        2,560    $            1,485
Multi-family                                                           179                   546
Commercial                                                           5,336                 8,610
Construction and land                                                  364                   448
Total real estate loans                                              8,439                11,089
Commercial business loans                                              791                   953
Consumer loans:
Home equity lines of credit                                             71                   407
Other consumer loans                                                     -                     -
Total consumer loans                                                    71                   407
Total substandard - performing                                       9,301                12,449

Substandard - Nonperforming:
Real estate loans:
One- to four-family                                                  3,621                 4,268
Multi-family                                                         2,680                 2,789
Commercial                                                           3,181                 2,376
Construction and land                                                  247                   108
Total real estate loans                                              9,729                 9,541
Commercial business loans                                               84                     -
Consumer loans:
Home equity lines of credit                                            434                   310
Other consumer loans                                                     7                    45
Total consumer loans                                                   441                   355
Total substandard - nonperforming                                   10,254                 9,896

Total classified loans                                              19,555                22,345

Securities(1)                                                            -                   230
Foreclosed real estate                                               1,990                 2,728

Total classified assets                                     $       21,545    $           25,303

Special mention:
Real estate loans:
One- to four-family                                         $          123    $              806
Multi-family                                                           920                     -
Commercial                                                           3,654                 1,795
Construction and land                                                    -                   177
Total real estate loans                                              4,697                 2,778
Commercial business loans                                              866                   780
Consumer loans:
Home equity lines of credit                                              -                     -
Other consumer loans                                                     -                     -
Total consumer loans                                                     -                     -
Total special mention                                                5,563                 3,558

Total classified assets and special mention loans           $       27,108    $           28,861



(1) Represents municipal bonds that management believed it was appropriate to classify as substandard as a result of downgraded ratings issued by the ratings agencies.

The decrease in classified assets from September 30, 2012 to March 31, 2013 was primarily due to the disposition of foreclosed real estate and the repayment of classified loans.


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Non-Performing Assets

The following table sets forth information regarding our non-performing assets and troubled debt restructurings at the dates indicated. The information reflects net charge-offs but not specific reserves. Troubled debt restructurings include loans where the borrower is experiencing financial difficulty and for which either a portion of interest or principal has been forgiven or an extension of term granted, or for loans modified at interest rates materially less than current market rates.

                                                        At March 31, 2013     At September 30, 2012
                                                                  (Dollars in thousands)
Nonaccrual loans:
Real estate loans:
One- to four-family                                    $             3,902    $                4,610
Multi family                                                         2,680                     2,789
Commercial                                                           3,181                     2,376
Construction and land                                                  247                       108
Total real estate                                                   10,010                     9,883
Commercial business loans                                               84                         -
Consumer loans:
Home equity lines of credit                                            434                       310
Education                                                              254                       199
Automobile                                                               7                         3
Other consumer loans                                                     -                        42
Total consumer loans                                                   695                       554
Total nonaccrual loans(1)                                           10,789                    10,437

Loans greater than 90 days delinquent and still
accruing:
Real estate loans:
One- to four-family                                                      -                         -
Multi-family                                                             -                         -
Commercial                                                               -                         -
Construction and land                                                    -                         -
Total real estate                                                        -                         -
Commercial business loans                                                -                         -
Consumer loans:
Home equity lines of credit                                              -                         -
Education                                                                -                         -
Automobile                                                               -                         -
Other consumer loans                                                     -                         -
Total consumer loans                                                     -                         -
Total delinquent loans accruing                                          -                         -

Total non-performing loans                                          10,789                    10,437

Foreclosed assets:
One- to four-family                                                    683                       591
Multi-family                                                           551                       410
Commercial real estate                                                 401                       684
Construction and land                                                  355                     1,043
Commercial assets                                                        -                         -
Consumer                                                                 -                         -
Total foreclosed assets                                              1,990                     2,728

Total nonperforming assets                             $            12,779    $               13,165

Performing troubled debt restructurings                $             5,028    $                6,302

Ratios:
Nonperforming loans to total loans                                    3.00 %                    2.73 %
Nonperforming assets to total assets                                  2.19 %                    2.50 %
Nonperforming assets and troubled debt
restructurings to total assets                                        3.03 %                    3.70 %



(1) Includes $2.2 million and $1.3 million, respectively, of troubled debt restructurings that were on non-accrual status at March 31, 2013 and September 30, 2012.


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Interest income that would have been recorded for the six months ended March 31, 2013, had non-accruing loans been current according to their original terms, amounted to $195,000. Interest of approximately $38,000 related to these loans was included in interest income for the six months ended March 31, 2013.

Other Loans of Concern. There were no other loans at March 31, 2013 that are not already disclosed where there is information about possible credit problems of borrowers that caused management to have serious doubts about the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure of such loans in the future.

Comparison of Operating Results for the Three Months Ended March 31, 2013 and March 31, 2012

General. Net income for the three months ended March 31, 2013 was $326,000, compared to $656,000 for the three months ended March 31, 2012, a decrease of $330,000. The decrease in net income was primarily due to decreases in net interest income of $684,000 and noninterest income of $737,000 offset by decreases in noninterest expense of $883,000 and in income taxes of $277,000.

Interest and Dividend Income. Interest and dividend income decreased $979,000, or 17.2%, to $4.7 million for the three months ended March 31, 2013 from $5.7 million for the three months ended March 31, 2012. This decrease was primarily attributable to a $760,000 decrease in interest and fee income on loans receivable and a $214,000 decrease in interest and dividend income on investment securities. The average balance of loans during the three months ended March 31, 2013 decreased $32.9 million to $369.5 million from $402.4 for the three months ended March 31, 2012. The average yield on loans decreased by 37 basis points to 4.72% for the three months ended March 31, 2013 from 5.09% for . . .

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