UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04 - 2830731
(State or other jurisdiction of inc. or organization) (I.R.S. Employer I.D. No.)
225 Park Avenue, West Springfield, Massachusetts 01090-0149
(Address of principal executive offices) (Zip Code)
(413) 747-1400
(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 12
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
Common stock, par value $2 per share: 3,127,493 shares outstanding
as of April 30, 1994.
WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statement of Stockholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Financial Statements 7-9
Management's Discussion and Analysis of Financial Condition and
Results of Operation 9-18
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 2. Changes in Rights of Securities Holders 17
ITEM 3. Defaults by Company on its Senior Securities 17
ITEM 4. Results of Votes on Matters Submitted to a Vote
of Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
Signatures 18
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(Dollar amounts in thousands)
ASSETS March 31, 1994 December 31, 1993
Cash and due from banks (Unaudited)
Non-interest bearing $ 10,181 $ 9,621
Interest bearing 362 353
Federal Funds sold 3,300 3,000
Securities available for sale
(approximate market value of $9,502 in 1994
$5,085 in 1993) 9,502 4,945
Securities held to maturity (approximate
market value of $17,245 in 1994 and
$27,398 in 1993) 17,224 26,633
Mortgage-backed securities (approximate
market value of $377 in 1994 and $422 in 1993) 369 401
Loans $ 178,704 $ 176,090
Allowance for loan losses (3,463) (3,472)
Net-loans 175,241 172,618
Bank premises and equipment 2,996 3,088
Other Real Estate Owned (OREO) $ 3,041 $ 3,601
In-substance foreclosures 1,791 1,979
Valuation allowance (681) (440)
Net-O.R.E.O. 4,151 5,140
Accrued interest receivable 1,628 1,560
Deferred income tax receivable 769 369
Refundable income tax 40 50
Other assets 1,333 1,085
TOTAL ASSETS $ 227,096 $ 228,863
LIABILITIES AND EQUITY
Deposits
Non-interest bearing $ 35,806 $ 34,499
Interest bearing 168,758 167,932
Total Deposits 204,564 202,431
Borrowed funds 7,381 12,420
Accrued interest payable 464 541
Other liabilities 454 200
Total Liabilities 212,863 215,592
Stockholders' Equity
Preferred stock - $5 par value 0 0
Authorized - 100,000 shares
Issued - none
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 3,127,493 shares in 1994 and
3,125,506 shares in 1993 6,255 6,251
Additional paid in capital 6,864 6,861
Retained earnings 1,075 159
Net unrealized gain on securities
available for sale 39 0
Total Stockholders' Equity 14,233 13,271
TOTAL LIABILITIES AND EQUITY $ 227,096 $ 228,863
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR QUARTER ENDED MARCH 31, 1994 AND 1993
(Dollar amounts in thousands)
(Unaudited)
THREE MONTHS ENDED
03-31-94 03-31-93
Income:
Interest and fees on loans $ 3,516 $ 3,816
Interest from temporary investments 14 43
Interest and dividends from securities 483 418
Total interest and dividend income 4,013 4,277
Interest expense 1,406 1,880
Net interest income 2,607 2,397
Provision for loan losses 347 225
Interest income after provision for loan losses 2,260 2,172
Security gains
Other non-interest income 596 528
Income before operating expenses 3,006 2,796
Operating Expenses:
Salaries and benefits 908 962
Other Real Estate-provison for losses 241 255
-operating expense 104 150
Other non-interest expense 832 848
Occupancy - net 185 160
Total operating expenses 2,270 2,375
Income before income taxes 736 421
Income taxes (benefit) (180) 80
Income before cumulative effect of change in
accounting principle 916 341
Cumulative effect of change in accounting principle
- income taxes 0 400
Net Income $ 916 $ 741
Earnings per share
before cumulative effect of change
in accounting principle $ .28 $ .11
Earnings per share
after cumulative effect of change
in accounting principle - income taxes $ .28 $ .23
Weighted average of common and
common share equivalents 3,195,513 3,147,382
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THREE MONTHS ENDED MARCH 31, 1994
(1994 Unaudited)
(Dollar amounts in thousands)
NET UNREALIZED
GAIN ON
COMMON STOCK ADD'L. SECURITIES
NUMBER OF PAR PAID IN RETAINED AVAIL.
SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL
DECEMBER 31, 1992 3,115,689 $ 6,231 $ 6,849 $( 1,788) $ 0 $ 11,292
Shares issued under
stock option plan 5,700 12 12
Shares issued under stock
purchase plan 4,117 8 12 20
Net income for the year
ended December 31, 1993 1,947 1,947
DECEMBER 31, 1993 3,125,506 6,251 6,861 159 0 13,271
Shares issued under stock
option plan 1,100 2 2
Shares issued under stock
purchase plan 887 2 3 5
Net unrealized gain on
securities available for sale 39 39
Net income for three months
ended March 31, 1994 916 916
MARCH 31, 1994 3,127,493 $ 6,255 $ 6,864 $ 1,075 $ 39 $ 14,233
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1994 and 1993
(Unaudited)
(Dollar amounts in thousands)
INCREASE/(DECREASE) IN CASH FLOW FROM:
THREE MONTHS ENDED
OPERATING ACTIVITIES:
03-31-94 03-31-93
Net Income
Adjustments to reconcile net income to
net cash from operating activities:
Provision for loan losses 347 225
Provision for depreciation and amortization 156 196
Charge off in carrying value of other real estate owned 241 255
Gain on sale of investment securities ( 150) ( 95)
Increase/(Decrease) In Cash Flow From:
Accrued interest receivable ( 68) 671
Accrued interest payable ( 77) ( 48)
Income tax benefit ( 390) ( 445)
Other assets ( 248) ( 753)
Other liabilities 254 ( 154)
981 593
INVESTING ACTIVITIES:
Proceeds from maturities of investments and
mortgage-backed securities 596 9,466
Proceeds from sales of securities
available for sale 4,979 2,411
Purchases of investment and mortgage-backed securities ( 502) ( 8,560)
Loans/leases - net of non cash transfers to other assets ( 3,193) ( 1,161)
Proceeds from sale of other real estate owned and
in-substance foreclosures 971 440
Purchases of bank premises and equipment ( 64) ( 17)
( 2,787) 2,579
FINANCING ACTIVITIES:
Deposits 2,133 5,726
Increase/(decrease) in short term borrowings ( 5,039) 1,062
Proceeds from exercise of stock options and
stock purchase plan 7 0
( 2,899) 6,788
Increase/(decrease) in cash and cash equivalents 869 ( 3,616)
Cash and cash equivalents at beginning of period 12,974 17,607
Cash and cash equivalents at end of period $ 13,843 $ 13,991
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the three months:
Interest on deposits and other borrowings $ 553 $ 1,928
Income taxes 210 125
Non-cash investing activities:
Transfer of loans to other real estate owned
and in-substance foreclosure $ 223 $ 1,349
See accompanying notes to condensed consolidated financial statements.
WESTBANK CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE A - GENERAL INFORMATION
Westbank Corporation (hereinafter sometimes referred to as
"Westbank") is a registered Bank Holding Company organized to
facilitate the expansion and diversification of the business of Park
West Bank and Trust Company (hereinafter sometimes referred to as
"Park West") into additional financial services related to banking
which are permitted by the Federal Bank Holding Company Act of 1956,
as amended. Westbank became the owner of all of Park West's
outstanding capital stock effective July 2, 1984.
On February 20, 1987, Westbank became the owner of all the
outstanding stock of Chicopee Co-operative Bank (hereinafter
sometimes referred to as "Chicopee"), a state-chartered stock
co-operative bank.
On February 26, 1990, the merger of Chicopee Co-operative Bank into
Park West Bank and Trust company was completed with the Chicopee
Office becoming a full service office operating under the charter of
Park West.
Substantially all operating income and net income of the Corporation
are presently accounted for by Park West.
NOTE B - CURRENT OPERATING ENVIRONMENT
In March, 1992, Park West's Board of Directors entered into a formal
agreement ("Agreement") with the Federal Deposit Insurance
Corporation and the Commissioner of Banks for the Commonwealth of
Massachusetts (the "Commissioner"). The Agreement requires Park
West to take certain affirmative actions in response to a 1991
examination by the FDIC and the Commissioner. The affirmative
actions required by the Order include, the development and
implementation of a written management plan and a plan to improve
Park West's earnings; the development and implementation of a
comprehensive policy for determining the adequacy of Park West's
allowance for loan and lease losses; the development and
implementation of a policy to lessen Park West's risk position with
respect to certain borrowers; the development and implementation of
a written funds management policy; the increase of Park West's Tier
1 capital to total asset ratio to 6% by June 30, 1994; an agreement
not to declare or pay dividends without the prior approval of the
FDIC and the Commissioner, as well as an agreement not to make any
payments to, or for the benefit of, any affiliated organization
without such prior approval. At March 31, 1994, the Bank met the
interim Tier 1 capital requirements outlined in the Agreement and
has submitted all of the required plans and policies as called for
under the Agreement.
Park West anticipates that it will be able to comply with the terms
of the Agreement. Failure to do so could result in additional
administrative actions by the FDIC or the Commissioner, any of which
actions could have a substantial negative impact on Park West.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted into law on December 19, 1991 and imposes
significant new regulatory restrictions and requirements on banking
institutions insured by the FDIC and their holding companies.
Effective December 19, 1992, FDICIA established five capital
categories into which financial institutions are placed based on
capital level. The capital categories established by FDICIA are:
well capitalized; adequately capitalized; undercapitalized;
significantly undercapitalized; and critically under- capitalized.
Each capital category establishes different degrees of regulatory
restrictions which can apply to a financial institution. As of
March 31, 1994, Park West's capital was at a level that placed the
Bank in the adequately capitalized category. As a result of Park
West's capital classification the following restriction applies: The
Bank may not accept, renew, or rollover any brokered deposits
without prior written permission of the FDIC.
FDICIA imposes a variety of other restrictions and requirements on
insured banks. These include significant new regulatory reporting
requirements for fiscal years commencing after December 31, 1992, a
system of risk-based deposit insurance premiums and civil money
penalties for inaccurate deposit assessment reports. In addition, a
system of regulatory standards for bank and bank holding company
operations, detailed new truth in savings disclosure requirements,
and restrictions on activities authorized by state law but not
authorized for national banks.
The weak economy and real estate market continues to impair the
financial results of the Corporation. Despite these weaknesses the
Corporation has managed significant improvements in the level of
non-performing assets. As a result of the continued aggressive
management of problem loans and an on-going expense reduction
program, the Board of Directors and management believe the
Corporation is positioned to sustain compliance with the Formal
Order as well as the requirements of FDICIA.
NOTE C - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements for the first quarter ended March 31, 1994 and 1993 have
been prepared in accordance with generally accepted accounting
principles for interim information and with instructions for Form
10-Q. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1994, are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1994.
For further information, please refer to the Consolidated Financial
Statements and footnotes thereto included in the Westbank
Corporation's Annual Report on Form 10-K for the year ended December
31, 1993.
NOTE D - CHANGES IN PRINCIPLES
On January 1, 1994, the Bank adopted Statement on Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". This pronouncement
requires that securities classified as available for sale be
reported at fair value with unrealized gains and losses excluded
from earnings and reported as a separate component of stockholders'
equity. The effect of the implementation of this pronouncement was
to increase stockholders' equity by approximately $39,000 (net of
tax effect) on March 31, 1994.
The Corporation adopted "SFAS 115" by categorizing all investments
with a maturity of less than three years as available for sale. In
addition, any mortgage-backed securities created out of the Banks
own inventory of residential real estate loans is also considered
available for sale. All other investments are considered to be held
to maturity.
The securities available for sale as disclosed in the accompanying
Consolidated Balance Sheet are stated at cost for 1993 and market
value for 1994.
There were no sales out of the investment portfolio during the first
quarter of 1994.
NOTE E - EARNINGS PER SHARE
Earnings per share were computed by dividing net income by the
weighted average number of shares of common stock outstanding and
common stock equivalent shares arising from unexercised stock
options. The weighted average of common and common stock
equivalents for the periods ended March 31, 1994 and 1993, amounted
to 3,195,513 and 3,147,382 shares, respectively.
NOTE F - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are outstanding commitments
and contingent liabilities, such as, standby letters of credit and
commitments to extend credit. As of March 31, 1994 standby letters
of credit amounted to $1,321,000 and loan commitments were
$30,162,000 and unused balances available on home equity lines of
credit were $7,649,000.
Trust Assets - Property with a book value of $86,758,710 at March
31, 1994 held for customers by a subsidiary in a fiduciary or agency
capacity, is not included in the accompanying Balance Sheet since
such items are not assets of the Bank.
NOTE G - STOCKHOLDERS' EQUITY
The FDIC imposes leverage capital ratio requirements for state
non-member Banks. The Bank's leverage capital ratio as of March 31,
1994 and December 31, 1993 was 6.31% and 5.90%, respectively.
In addition, the FDIC has established risk-based capital
requirements for insured institutions of, Tier 1 risk-based capital
of 4.00% and total risk-based capital of 8.00%. The Bank's
risk-based capital at March 31, 1994, for Tier 1 was 8.32% and total
risk-based capital was 9.58%.
As discussed in NOTE B, the formal regulatory order requires Park
West to increase its level of Tier 1 leverage capital and to comply
with the minimum requirements of risk-based capital. As of March
31, 1994, the Bank was in compliance with all required capital
targets.
The Formal Order requires that Park West's Tier 1 leverage capital
ratio be increased to a minimum of 6% by June 30, 1994. Under the
agreement, capital ratio targets have been set in six month
intervals, with the next target required to be a minimum of 6.00% by
June 30, 1994.
Under the agreement, the Corporation is prohibited from paying
dividends without the prior approval of the FDIC and the
Massachusetts Commissioner of Banks.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Total consolidated assets amounted to $227,096,000 on March 31,
1994, compared to $228,863,000 on December 31, 1993. As of March
31, 1994 and March 31, 1993 earning assets amounted to,
respectively, $209,461,000, or 92% of total assets, and
$205,192,000, or 90% of total assets.
For the quarter ended March 31, 1994, net income totaled $916,000
compared to $741,000 for the three month period ended March 31,
1993. Included in the results of the current quarter is a $180,000
tax benefit which is the result of a decrease in the valuation
reserve pertaining to deferred tax assets, offset by the provision
for current taxes.
In addition, the Corporation absorbed a one time charge to earnings
totaling $130,000 in preparation for the change from an in-house
data processing environment to that of a service bureau.
Net income for the quarter ended March 31, 1993 reflects a benefit
of $400,000 as a result of a cumulative effect of a change in
accounting principle for income taxes.
An overall reduction in interest income and interest expense
reflects an increase in volume and a decrease in interest rates on
earning assets, and decreases in volume and interest rates on
interest bearing deposits. Further analysis is provided in sections
on net interest revenue and supporting schedules. An increase has
been reflected in the provision for loan losses in the current
quarter with $347,000 being provided compared to $225,000 in the
1993 quarter. Decreases are noted in other real estate provisions
and operating expenses. This expense totalled $345,000 for the
current quarter compared with $405,000 a year ago, a decrease of
$60,000.
Loans and leases written-off against the allowance for loan/lease
losses after recoveries amounted to $356,000 in the current quarter
compared to $247,000 during the quarter ended December 31, 1993.
After giving effect to the actions described above, the allowance
for loan/lease losses at March 31, 1994, totalled $3,463,000 or
1.94% of total loans/leases as compared to $3,472,000 or 1.97% at
December 31, 1993.
Non-performing past due loans/leases at March 31, 1994, aggregated
$2,678,000 or 1.50% of total loan/leases compared to $1,903,000 or
1.08% at December 31, 1993. The percentage of non-performing and
past due loan/leases compared to total assets on those same dates,
respectively amounted to 1.18%, and 0.83%.
Other real estate owned and in-substance foreclosures-net, amounted
to $4,151,000 at March 31, 1994, compared to $5,140,000 at December
31, 1993. The percentage as compared to total assets on those same
dates respectively amounted to 1.83%, and 2.25%.
Management has made every effort to recognize all circumstances
known at this time which could affect the collectibility of
loan/leases and has reflected these in deciding as to the provision
for loan/lease losses, the writing down of other real estate owned
and in-substance foreclosures to fair value, the charge-off of
loans/leases and the balance in the allowance for losses.
Management deems that the provision for the quarter, and the balance
in the allowance for loan/lease losses, are adequate based on
results provided by the grading system and circumstances known at
this time.
NET INTEREST INCOME
The Corporation's earning assets include a diverse portfolio of
earning instruments ranging from the Corporation's core business of
loan extensions to interest-bearing securities issued by federal,
state and municipal authorities. These earning assets are financed
through a combination of interest-bearing and interest-free sources.
Net interest income, the most significant component of earnings, is
the amount by which the interest generated by assets exceeds the
interest expense on liabilities. For analytical purposes, the
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.
The Corporation analyzes its performance by utilizing the concepts
of interest rate spread and net yield on earning assets. The
interest rate spread represents the difference between the yield on
earning assets and interest paid on interest-bearing liabilities.
The net yield on earning assets is the difference between the rate
of interest on earning assets and the effective rate paid on all
funds - interest-bearing liabilities, as well as, interest-free
sources (primarily demand deposits and shareholders' equity).
The balances and rates derived for the analysis of net interest
income presented on the following pages reflect the consolidated
assets and liabilities of the Corporation's principal earning
subsidiary, Park West Bank and Trust Company.
QUARTER ENDED
(Dollar amounts in thousands) 03-31-94 03-31-93
Interest revenue $ 4,013 $ 4,277
Interest expense 1,406 1,880
Net interest income 2,607 2,397
Tax equivalent adjustment 6 6
Net interest income (taxable equivalent) $ 2,613 $ 2,403
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands) QUARTER ENDED
03-31-94 03-31-93
(Taxable Equivalent) Average Average
Balance Rate Balance Rate
Earning Assets $208,399 7.72% $208,190 8.23%
Interest-bearing
liabilities 176,329 3.19 189,675 3.96
Interest rate spread 4.53 4.27
Interest-free
resources used to
fund earning assets 32,070 18,515
Total Sources of Funds $208,399 2.70 $208,190 3.61
Net Yield on Earning Assets 5.02% 4.62%
CHANGES IN NET INTEREST EARNED
(Dollar amounts in thousands)
QUARTER ENDED 03-31-94
(Taxable Equivalent) O V E R
QUARTER ENDED 03-31-93
CHANGE DUE TO
Interest Earned VOLUME RATE TOTAL
Loans/leases $ 33 $( 333) $( 300)
Securities 36 29 65
Federal funds ( 26) ( 3) ( 29)
Total Interest Earned 43 ( 307) ( 264)
Interest Expense
Interest bearing deposits ( 129) ( 336) ( 465)
Other borrowed funds 1 ( 10) ( 9)
Total Interest Expense ( 128) ( 346) ( 474)
Net Interest Earned $ 171 $ 39 $ 210
Net interest earned on a taxable equivalent basis increased to
$2,613,000 in the first quarter of 1994, up $210,000 as compared
with the comparable period of 1993, or 7%.
Average earning assets increased slightly during the first quarter
of 1994. The average earning base was $208,399,000 compared to
$208,190,000 in the same period last year, an increase of $209,000
or 1%.
OPERATING EXPENSES
The components of total operating expenses for the periods and their
percentage of gross income are as follows:
QUARTER ENDED
(Dollar amounts in thousands) 03-31-94 03-31-93
Amount Percent Amount Percent
Salaries and benefits $ 908 19.08% $ 962 19.63%
Other Real Estate - provision for losses 241 5.06 255 5.20
Other non-interest expense 936 19.67 998 20.36
Occupancy - net 185 3.89 160 3.26
Total Operating Expenses $2,270 47.70% $2,375 48.45%
INCOME TAXES
In February, 1992, the Financial Accounting Standards Board issued
statement of financial accounting standard No. 109, "Accounting for
Income Taxes" ("SFAS 109"). The statement requires the recognition
of deferred tax liabilities and deferred tax assets, net of
applicable reserves, related to net operating loss carryforwards and
certain temporary differences. Effective January 1, 1993, the
Corporation prospectively adopted SFAS 109, resulting in a $400,000
benefit which has been reported as a cumulative effect of a change
in accounting principle.
During the first quarter of 1994 Westbank recorded a tax benefit of
$180,000 which is primarily the result of a decrease in the
valuation reserve pertaining to deferred tax assets offset by the
provision for current taxes. The decrease in such valuation reserve
is due to the continued profitable performance of the Bank and is in
accordance with the guidance in Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
COMPONENTS OF CAPITAL
(Dollar amounts in thousands)
March 31, 1994 December 31, 1993
Stockholders' Equity:
Common Stock $ 6,255 $ 6,251
Additional paid-in capital 6,864 6,861
Retained earnings 1,075 159
Net unrealized gain on securities
available for sale 39 0
Total Stockholders' Equity $14,233 $13,271
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.27% 5.80%
Regulatory risk-based capital requirements, which became effective
on December 31, 1990, take into account the different risk
categories of banking organizations by assigning risk weights to
assets and the credit equivalent amounts of off-balance sheet
exposures.
In addition, capital is divided into two tiers. For this
Corporation, Tier 1 includes the common stockholders' equity; Tier
2, or supplementary capital, includes not only the equity, but also,
a portion of the allowance for loan losses, net unrealized
gain/(losses) on securities available for sale are not permitted to
be included for regulatory capital purposes.
The following are the Corporation's risk-based capital ratios at
March 31, 1994:
Tier 1 Capital (minimum required 4.00%) 8.23%
Tier 2 Capital (minimum required 8.00%) 9.49%
The Formal Order requires that Park West's Tier 1 leverage capital
ratio be increased to a minimum of 6% by June 30, 1994. Under the
Formal Order capital ratio targets have been set in six month
intervals. At March 31, 1994 the Formal Order required Park West's
Tier 1 leverage capital to be at a minimum of 5.75%. For Park West,
Tier 1 leverage capital is calculated using quarterly average
assets. At March 31, 1994 Park West's Tier 1 leverage capital to
average assets was 6.31%, which is above the interim target
established by the Formal Order. The next interim target agreed
under the Formal Order is 6.00% by June 30, 1994.
Under the Formal Order, the Corporation is prohibited from paying
dividends without the prior approval of the FDIC and the
Massachusetts Commissioner of Banks.
INTEREST RATE SENSITIVITY
The following table sets forth the distribution of the repricing of
the Corporation's earning assets and interest bearing liabilities as
of March 31, 1994.
(Dollar amounts in thousands)
Over Three Over One
Three Months Months to Year to Over
or Less One Year Five Years Five Years Total
Earning Assets $ 71,547 $ 51,341 $ 57,357 $ 29,216 $209,461
Interest Bearing
Liabilities 108,164 31,740 36,235 0 176,139
Interest Rate
Sensitivity Gap $( 36,617) $ 19,601 $ 21,122 $ 29,216 $ 33,322
Cumulative Interest
Rate
Sensitivity Gap $( 36,617) $( 17,016) $ 4,106 $ 33,322
Interest Rate
Sensitivity
Gap Ratio (17.48)% 9.36% 10.08% 13.95%
Cumulative Interest
Rate Sensitivity
Gap Ratio (17.48)% (8.12)% 1.96% 15.91%
LIQUIDITY
Cash and due from banks, federal funds sold, investment securities,
mortgage-backed securities and loans available for sale, as compared
to deposits and short term liabilities, are used by the Corporation
to compute its liquidity on a daily basis. At March 31, 1994, the
Corporation's ratio of such assets to total deposits and borrowed
funds was 25.21%.
PROVISION AND ALLOWANCE FOR LOAN/LEASE LOSSES
(Dollar amounts in thousands) QUARTER ENDED
03-31-94 03-31-93
Balance at beginning of period $ 3,472 $ 3,442
Provision charged to expense 347 225
3,819 3,667
Less-Charge-offs:
Loans secured by real estate 267 19
Construction/land development 0 150
Commercial and industrial loans 128 99
Consumer loans 8 12
Lease financing receivables 0 41
403 321
Add-Recoveries:
Loans secured by real estate 0 42
Construction/land developing 0 0
Commercial and industrial loans 42 7
Consumer loans 4 9
Lease financing receivables 1 1
47 59
Net charge-offs 356 262
Balance at end of period $ 3,463 $ 3,405
Net Charge-offs to:
Average loan/leases .20% .15%
Loans/leases at end of period .20% .15%
Allowance for loan/lease losses 10.28% 7.69%
Allowance for loan/lease losses
as a percentage of:
Average loan/leases 1.97% 1.95%
Loan/leases at end of period 1.94% 1.96%
The approach the Corporation uses in determining the adequacy of the
Allowance for Loan/Lease Losses is the combination of a target
reserve and a general reserve allocation. Quarterly, based on an
internal review of the Loan Portfolio, the Corporation identifies
required reserve allocations targeted to recognized problem loans
that, in the opinion of management, have potential loss exposure or
questions relative to the depth of the collateral on these same
loans. In addition, the Corporation allocates a general reserve
against the remainder of the Loan Portfolio.
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
(Dollar amounts in thousands)
Non-Accrual Loans: 03-31-94 12-31-93 09-30-93 06-30-93 03-31-93
Loans secured by real estate $ 513 $ 524 $ 585 $ 583 $ 616
Construction/Land development 91 91 99 103 105
Commercial and Industrial Loans 466 445 392 563 167
Consumer Loans 7 18 24 42 69
Lease financing receivables 0 0 0 0 20
1,077 1,078 1,100 1,291 977
Loans Contractually
past due 90 days or more
still accruing:
Loans secured by real estate 921 285 92 246 608
Construction/Land development 22 0 0 0 0
Commercial and Industrial Loans 16 5 26 0 15
Consumer Loans 18 31 15 8 12
Lease financing receivables 7 9 0 0 0
984 330 133 254 635
Restructured Loans * 617 494 955 923 873
Total non-accrual, past
due and restructured
Loans $ 2,678 $ 1,902 $ 2,188 $ 2,468 $ 2,485
Non-accrual, past due and
restructured Loans
as a percentage of total
Loans 1.50% 1.08% 1.29% 1.44% 1.43%
Allowance for Loan
losses as a percentage of
non accrual, past due and
restructured Loans 129.31% 182.54% 157.40% 135.29% 137.02%
OTHER REAL ESTATE
Other real estate owned - net $ 2,360 $ 3,161 $ 3,036 $ 3,143 $ 4,457
In substance foreclosure 1,791 1,979 2,886 4,278 5,062
Total Other Real Estate $ 4,151 $ 5,140 $ 5,922 $ 7,421 $ 9,519
* As of March 31, 1994, 100% of restructured loans are performing in
compliance with the modified terms of their restructuring.
WESTBANK CORPORATION AND SUBSIDIARIES
QUARTER TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(RATES ON A TAX EQUIVALENT BASIS)
(Dollar amounts in thousands)
THREE MONTHS ENDED THREE MONTHS ENDED
March 31, 1994 March 31, 1993
Balance Interest Rate Balance Interest Rate
Federal Funds sold and
temporary investments $ 2,067 $ 14 2.71% $ 5,730 $ 43 3.00%
Securities 30,439 483 6.35 28,081 418 5.95
Loans/leases 175,893 3,522 8.01 174,379 3,822 8.77
Total earning assets 208,399 $ 4,019 7.72 208,190 $ 4,283 8.23
Loan/lease loss allowance (3,469) (3,405)
All other assets 19,342 24,307
TOTAL ASSETS $224,272 $229,092
LIABILITIES AND EQUITY
Interest bearing deposits $166,627 $ 1,345 3.23 $180,110 $ 1,810 4.02
Borrowed funds 9,702 61 2.51 19,565 70 2.93
Total interest bearing
liabilities 176,329 $ 1,406 3.19 189,675 $ 1,880 3.96
Interest rate spread 4.53% 4.27%
Demand deposits 33,290 27,230
Other liabilities 713 667
Shareholders' equity 13,940 11,520
TOTAL LIABILITIES
AND EQUITY $224,272 $229,092
Net Interest Income $ 2,613 $ 2,403
Interest Earned/Earning Assets 7.72% 8.23%
Interest Expense/Earning Assets 2.70 3.61
Net Yield on Earning Assets 5.02% 4.62%
Deduct - Tax Equivalent Adjustment 6 6
NET INTEREST INCOME $ 2,607 $ 2,397
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Rights of Securities Holders
None
ITEM 3. Defaults by Company on its Senior Securities
None
ITEM 4. Results of Votes on Matters Submitted to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8
None
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
WESTBANK CORPORATION
Date: May 9, 1994
Donald R. Chase
President and Chief Executive Officer
Date: May 9, 1994
John M. Lilly, Treasurer and
Chief Financial Officer
