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 June 30, 1995
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 org.) (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: 3,193,743 shares
outstanding as of July 31, 1995.
<PAGE>
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 Statements of Stockholders' Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7-9
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-16
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
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
(Dollar amounts in thousands)
<CAPTION>
ASSETS June 30, 1995 December 31, 1994
Cash and due from banks: (Unaudited)
<S> <C> <C>
Non-interest bearing $ 11,807 $ 10,425
Interest bearing 19 275
Federal Funds sold 5,500 1,000
Total cash and cash equivalents 17,326 11,700
Securities available for sale
(Amortized cost of $17,057 in 1995 and
$8,001 in 1994) 17,209 7,753
Securities held to maturity (approximate
market value of $20,510 in 1995 and
$20,631 in 1994) 20,486 21,463
Mortgage-backed securities (approximate
market value of $321 in 1995 and $327 in 1994) 309 331
Loans $ 195,580 $ 196,002
Allowance for loan losses (3,005) (3,325)
Net-loans 192,575 192,677
Bank premises and equipment 3,538 3,417
Other real estate owned (OREO) - net of
allowance for losses of $36 in
1995 and $231 in 1994 1,775 1,552
Accrued interest receivable 1,707 1,668
Deferred income taxes 1,506 1,245
Other assets 1,567 1,507
TOTAL ASSETS $ 257,998 $ 243,313
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 39,985 $ 40,399
Interest bearing 193,340 178,164
Total Deposits 233,325 218,563
Borrowed funds 6,329 8,625
Accrued interest payable 289 240
Other liabilities 1,216 541
Total Liabilities 241,159 227,969
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 - 3,178,278 shares in 1995 and
3,138,167 shares in 1994 6,356 6,276
Additional paid in capital 6,974 6,877
Retained earnings 3,421 2,334
Net unrealized gain/(loss) on securities available
for sale 88 (143)
Total Stockholders' Equity 16,839 15,344
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 257,998 $ 243,313
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
06-30-95 06-30-94 06-30-95 06-30-94
<S> <C> <C> <C> <C>
Income:
Interest and fees on loans $ 4,460 $ 3,634 $ 8,699 $ 7,150
Interest on temporary investments 80 47 112 61
Interest and dividends on securities 579 413 1,074 896
Total interest and dividend income 5,119 4,094 9,885 8,107
Interest expense 2,211 1,496 4,137 2,902
Net interest income 2,908 2,598 5,748 5,205
Provision for loan losses 350 365 800 712
Interest income after provision
for loan losses 2,558 2,233 4,948 4,493
Operating Income:
Security gains 0 0 0 150
Other non-interest income 523 658 1,035 1,254
Total Operating Income 523 658 1,035 1,404
Operating Expenses:
Salaries and benefits 945 951 1,901 1,859
Other real estate-provision for losses 100 185 110 426
-operating expenses 90 116 210 220
Other non-interest expense 949 808 1,788 1,640
Occupancy - net 166 174 353 359
Total operating expenses 2,250 2,234 4,362 4,504
Income before income taxes 831 657 1,621 1,393
Income taxes (benefit) 284 124 219 (56)
Net Income $ 547 $ 533 $ 1,402 $ 1,449
Net income per share $ 0.17 $ 0.17 $ 0.43 $ 0.45
Weighted average shares of common
stock and common share
equivalents 3,253,803 3,202,174 3,238,007 3,197,527
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994 AND SIX MONTHS ENDED JUNE 30, 1995
(1995 Unaudited)
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
NET UNREALIZED
GAIN (LOSS) ON
COMMON STOCK ADDITIONAL SECURITIES
NUMBER OF PAR PAID IN RETAINED AVAILABLE
SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1993 3,125,506 $ 6,251 $ 6,861 $ 159 $ - $ 13,271
Net income - - - 2,175 - 2,175
Shares issued under stock
option plan 7,864 16 - - - 16
Shares issued under stock
purchase plan 4,797 9 16 - - 25
Cumulative effect of implementing
accounting standard for investments
as of January 1, 1994 - - - - 233 233
Unrealized loss on securities
available for sale for
the year - - - - (376) (376)
Balance, December 31, 1994 3,138,167 $6,276 $6,877 $2,334 $(143) $15,344
Net income for six months
ended June 30, 1995 1,402 1,402
Cash Dividend Declared:
Amount Declaration Record Paid
$0.05 1/10/95 1/20/95 1/25/95 (157) (157)
$0.05 4/19/95 5/01/95 5/03/95 (158) (158)
Shares issued under Dividend
Reinvestment Plan 15,626 31 53 84
Shares issued under stock
option plan 13,442 27 4 31
Shares issued under stock
purchase plan 11,043 22 40 62
Unrealized gain on
securities available
for sale for the year 231 231
BALANCE - JUNE 30, 1995 3,178,278 $6,356 $6,974 $3,421 $ 88 $16,839
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Six Months Ended
06-30-95 06-30-94
<S> <C> <C>
Operating activities:
Net income $ 1,402 $1,449
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 800 712
Depreciation and amortization 238 301
Provision for other real estate owned 110 426
Increase in interest payable on deposits 49 (38)
(Increase) decrease in accrued interest receivable (39) (79)
Realized gain on sale of securities 0 (150)
Realized (gain) loss on sale of other real estate owned (2) 0
Realized loss on sale of premises and equipment 15 0
Decrease (increase) in other assets (163) (8)
Increase (decrease) in other liabilities 119 124
Decrease (increase) in income taxes refundable 103 (38)
Increase in deferred taxes (261) (400)
Increase in accrued income taxes 556 0
Net cash provided by operating activities 2,927 2,299
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (1,500) (1,250)
Proceeds from maturities 2,500 1,432
Available for sale:
Purchases (9,971) (250)
Proceeds from sales 0 4,936
Proceeds from maturities 794 0
Purchases of premises and equipment (374) (488)
Net (increase) decrease in loans (1,409) (4,761)
Proceeds from sale of other real estate owned 331 1,619
Net cash provided by (used in) investing activities (9,629) 1,238
Financing activities:
Net increase (decrease) in borrowings (2,296) (6,317)
Net increase (decrease) in deposits 14,762 17,540
Proceeds from exercise of stock options and stock purchase plan 177 26
Dividends paid (315) 0
Net cash used by financing activities 12,328 11,249
Increase (decrease) in cash and cash equivalents 5,626 12,310
Cash and cash equivalents at beginning of year 11,700 12,974
Cash and cash equivalents at end of year $17,326 $25,284
Cash paid during the year:
Interest on deposits and other borrowings 4,088 2,939
Income taxes 0 270
Transfers of loans to other real estate owned 845 314
Sales of other real estate owned financed by the bank 134 742
</TABLE>
See notes to consolidated financial statements.
<PAGE>
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.
Substantially all operating income and net income of the Corporation
are presently accounted for by Park West.
NOTE B - CURRENT OPERATING ENVIRONMENT
From March, 1992 until December 22, 1994 Park West had been
operating under a Formal Order (the "Formal Order") with the Federal
Deposit Insurance Corporation and the Commissioner of Banks for the
Commonwealth of Massachusetts. On December 22, 1994, as a result of
the improved financial condition of the Bank, the Formal Order was
released. The Formal Order was replaced with a Memorandum of
Understanding (the "Memorandum"). The Memorandum is an informal
agreement with the Federal Deposit Insurance Corporation (the
"FDIC") and the Commissioner of Banks for the Commonwealth of
Massachusetts (the "Commissioner") requiring Park West, among other
things, to maintain a leverage capital ratio of at least 6%, to
develop a written plan of action to lessen its risk exposure to
certain borrowers and to refrain from extending or renewing credit
to any borrower who has a loan or extension of credit with Park West
that has been charged off or classified, without first obtaining
majority approval of Park West's Board of Directors. Park West must
maintain the allowance for loan losses at a level commensurate to
the risk in the loan portfolio. The Memorandum requires Park West
to obtain approval from the FDIC and the Commissioner prior to
paying or declaring a dividend. Finally, Park West is required to
make quarterly reports to the FDIC and the Commissioner detailing
the form and manner of action taken to secure compliance with the
Memorandum.
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 June
30, 1995, Park West's capital was at a level that placed the Bank in
the well capitalized category.
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.
<PAGE>
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 containment
program, the Board of Directors and management believe the
Corporation is positioned to sustain compliance with the Memorandum
as well as the requirements of FDICIA.
NOTE C - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements for the second quarter ended June 30, 1995 and 1994 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 six month period ended June 30, 1995, are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1995.
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, 1994.
NOTE D - CHANGES IN ACCOUNTING PRINCIPLES
On January 1, 1995 the Bank adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting for
Creditors for Impairment of a Loan - Income Recognition and
Disclosures".
SFAS No. 114 prescribes the methodology under which certain loans
are to be measured for impairment. Generally, a loan is considered
impaired when management believes it is probable that all amounts
due will not be collected according to the contractual terms of the
loan agreement. SFAS No. 118 amends SFAS No. 114 be eliminating
certain income recognition provisions and by expanding the
disclosure requirements. Adoption of these standards did not have a
material effect on the Bank's financial condition or results of
operations.
The Bank measures impairment of commercial loans by using the
present value of expected future cash flows discounted at the loan's
effective interest rate. Commercial real estate loans are generally
measured based on the fair value of the underlying collateral.
Smaller balance homogenous loans, including residential real estate
and consumer loans, are collectively evaluated for impairment.
The Bank evaluates each impaired loan to determine the income
recognition policy. Generally, income is recorded only on a cash
basis for impaired loans. Interest income recognized in the first
six months of 1995 on impaired loans was not significant.
At June 30, 1995, the recorded investment in impaired loans was
$1,101,000, for which no specific allowance for loan losses was
recorded. For the six months ended June 30, 1995, the average
recorded investment in impaired loans was $1,526,000.
<PAGE>
NOTE E - STOCKHOLDERS' EQUITY
The FDIC imposes leverage capital ratio requirements for state
non-member Banks. The Bank's leverage capital ratio as of June 30,
1995 and December 31, 1994 was 6.60% and 6.36%, 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 June 30, 1995, for Tier 1 was 9.05% and total
risk-based capital was 10.30%.
As discussed in NOTE B, on December 22, 1994, in conjunction with an
examination by the Commissioner the Formal Order was eliminated and
replaced with a Memorandum of Understanding. Park West is presently
in compliance with the Memorandum and management believes that the
Bank will be able to comply with all of the terms of the Memorandum
in the future.
Management is not aware of any regulatory recommendations which will
have a material impact on the Corporation's liquidity, capital
resources or results of operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Changes in Financial Condition -
Total consolidated assets amounted to $257,998,000 on June 30, 1995,
compared to $243,313,000 on December 31, 1994. As of June 30, 1995
and June 30, 1994 earning assets amounted to, respectively,
$239,103,000, or 93% of total assets, and $223,499,000, or 92% of
total assets. Earning assets increased during the first six months
of 1995 as a result of the origination of residential mortgages.
During the first six months of 1995 the Corporation securitized
approximately $10 million of residential mortgages into
Mortgage-Backed Securities, which were placed into the Corporation's
securities available for sale account. The increase in earning
assets was funded through an increase in deposits of approximately
$15 million.
Changes in results of Operations -
Operations reflect net income for the current quarter of $547,000 as
compared to a net income of $533,000 for the same quarter during
1994. For the six month period ended June 30, 1995, net income
totaled $1,402,000 compared to net income of $1,449,000 for the same
period one year ago. An overall increase in interest income and
interest expense reflects an increase in volume and interest rates
on earning assets, and interest bearing deposits. Further analysis
is provided in sections on net interest revenue and supporting
schedules.
For the six months ended June 30, 1995 the Corporation recorded tax
expense totaling $219,000 versus a benefit of $56,000 for the same
period of 1994. The increase in tax expense for 1995 is the result
of the Corporation's utilization of net operating loss carryforward
in 1994.
Allowance for loan/lease losses and non-performing assets -
A slight decrease has been reflected in the provision for loan
losses in the current quarter with $350,000 being provided compared
to $365,000 in the 1994 quarter. For the six month period ended
June 30, 1995 the provision for loan losses increased by $88,000
compared to the same period one year ago. The year to date increase
in the provision for loan/lease losses is the result of managements
review and analysis of the adequacy of the Corporation's allowance
for loan and lease losses.
<PAGE>
Loans and leases written-off against the allowance for loan/lease
losses after recoveries amounted to $1,120,000 for the first six
months of 1995 versus $230,000 for the same period of 1994. The
increase in net charge-offs during the 1995 period is the result of
the deterioration of two (2) loans secured by real estate for which
the Corporation had provided for in the allowance for loan/lease
losses in prior periods.
After giving effect to the actions described above, the allowance
for loan/lease losses at June 30, 1995, totalled $3,005,000 or 1.54%
of total loans/leases as compared to $3,325,000 or 1.70% at December
31, 1994.
Non-performing past due loans/leases at June 30, 1995, aggregated
$3,873,000 or 1.98% of total loan/leases compared to $5,883,000 or
3.00% at December 31, 1994. The percentage of non-performing and
past due loan/leases compared to total assets on those same dates,
respectively amounted to 1.50%, and 2.42%.
The decline in non-performing loans/leases represents the
resolution, charge-off and/or transfer to other real estate owned of
problem loans during the six months ended June 30, 1995.
Other real estate owned declined during the six month period of 1995
by $332,000 compared to the same period of 1994, resulting in reduced
other real estate provisions and operating expenses of $326,000 for
the six months ended June 30, 1995 versus June 30, 1994.
Other real estate owned-net, amounted to $1,775,000 at June 30,
1995, compared to $1,552,000 at December 31, 1994. The percentage
as compared to total assets on those same dates respectively
amounted to 0.69%, and 0.64%.
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 impaired loans to fair value and other loans (Watch List)
monitored by management, 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 SIX MONTHS ENDED
(Dollar amounts in thousands) 06-30-95 06-30-94 06-30-95 06-30-94
Interest income $ 5,119 $ 4,094 $ 9,885 $ 8,107
Interest expense 2,211 1,496 4,137 2,902
Net interest income 2,908 2,598 5,748 5,205
Tax equivalent adjustment 4 5 7 11
Net interest income
(taxable equivalent) $ 2,912 $ 2,603 $ 5,755 $ 5,216
<PAGE>
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1995 1994 1995 1994
(Taxable Equivalent) Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets $236,920 8.65% $213,428 7.68% $232,936 8.49% $210,799 7.70%
Interest-bearing
liabilities 197,319 4.48 180,208 3.32 194,013 4.26 178,269 3.26
Interest rate spread 4.17 4.36 4.23 4.44
Interest-free
resources used to
fund earning assets 39,601 33,220 38,923 32,530
Total Sources of Funds$236,920 3.73 $213,428 2.80 $232,936 3.55 $210,799 2.75
Net Yield on Earning Assets 4.92% 4.88% 4.94% 4.95%
</TABLE>
CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
QUARTER ENDED JUNE 30, 1995 SIX MONTHS ENDED JUNE 30, 1995
(Taxable Equivalent) O V E R O V E R
QUARTER ENDED JUNE 30, 1994 SIX MONTHS ENDED JUNE 30, 1994
CHANGE DUE TO CHANGE DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans/leases $ 320 $ 505 $ 825 $ 735 $ 810 $ 1,525
Securities 125 41 166 136 42 178
Federal funds 7 26 33 9 42 51
Total Interest Earned 452 572 1,024 880 894 1,774
Interest Expense:
Interest bearing deposits 158 543 701 290 895 1,185
Other Borrowed Funds (2) 16 14 (9) 59 50
Total Interest Expense $ 156 $ 559 $ 715 $ 281 $ 954 $ 1,235
Net Interest Income $ 296 $ 13 $ 309 $ 599 $ (60) $ 539
</TABLE>
Net interest earned on a taxable equivalent basis increased to
$2,912,000 in the second quarter of 1995, up $309,000 as compared
with the same period of 1994. Average earning assets increased
during the second quarter of 1995. The average earning base was
$236,920,000 compared to $213,428,000 in the same period last year,
an increase of $23,492,000. For the six month period ended June 30,
1995, net interest earned on a tax equivalent basis increased to
$5,755,000 up by $539,000 as compared with the comparable period of
1994 or 10%. Average earning assets increased by $22,137,000 or 10%
and the net yield on earning assets decreased to 4.94% from 4.95%
for the six month period ending June 30, 1995 compared to June 30,
1994.
<PAGE>
OPERATING EXPENSES
The components of total operating expenses for the periods and their
percentage of gross income are as follows:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
6-30-95 6-30-94 6-30-95 6-30-94
Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $ 945 16.75% $ 951 20.01% $1,901 17.41% $1,859 19.55%
Other real estate
- provision for losses 100 1.77 185 3.89 110 1.01 426 4.48
- operating expense 90 1.60 116 2.44 210 1.92 220 2.31
Other non-interest expense 949 16.82 808 17.00 1,788 16.37 1,640 17.24
Occupancy - net 166 2.94 174 3.67 353 3.24 359 3.78
Total Operating Expenses $2,250 39.88% $2,234 47.01% $4,362 39.95 $4,504 47.36%
</TABLE>
For the six month period operating expenses declined by
approximately $142,000 primarily the result of reduced other real
estate owned expenses due to the change in other real estate
holdings as discussed in the non-performing asset section on page 9
and 10.
COMPONENTS OF CAPITAL
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
June 30, 1995 December 31, 1994
<S> <C> <C>
Stockholders' Equity:
Common Stock $ 6,356 $ 6,276
Additional paid-in capital 6,974 6,877
Retained earnings 3,421 2,334
Net unrealized gain/(loss) on securities
available for sale 88 (143)
Total Stockholders' Equity $16,839 $15,344
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.53% 6.31%
</TABLE>
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
June 30, 1995:
Tier 1 Capital (minimum required 4.00%) 9.05%
Tier 2 Capital (minimum required 8.00%) 10.30%
Under the Memorandum, the Corporation is prohibited from paying
dividends without the prior approval of the FDIC and the
Massachusetts Commissioner of Banks.
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 June 30, 1995, the
Corporation's ratio of such assets to total deposits and borrowed
funds was 28.00%.
<PAGE>
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 June 30, 1995.
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Over Three Over One
Three Months Months to Year to Over
or Less One Year Five Years Five Years Total
<S> <C> <C> <C> <C> <C>
Earning Assets $ 77,383 $ 51,658 $ 71,724 $ 38,338 $239,103
Interest Bearing
Liabilities 67,653 54,362 77,654 0 199,669
Interest Rate
Sensitivity Gap $ 9,730 $ (2,704) $ (5,930) $ 38,338 $ 39,434
Cumulative Interest
Rate
Sensitivity Gap $ 9,730 $ 7,026 $ 1,096 $ 39,434
Interest Rate
Sensitivity
Gap Ratio 4.07% (1.13)% (2.48)% 16.04%
Cumulative Interest
Rate Sensitivity
Gap Ratio 4.07% 2.94% 0.46% 16.50%
PROVISION AND ALLOWANCE FOR LOAN/LEASE LOSSES
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
6-30-95 6-30-94 6-30-95 6-30-94
Balance at beginning of period $ 2,740 $ 3,463 $ 3,325 $ 3,472
Provision charged to expense 350 365 800 712
$ 3,090 $ 3,828 $ 4,125 $ 4,184
Less Charge-offs:
Loans secured by real estate 105 0 896 267
Commercial and industrial loans 0 0 204 128
Consumer loans 28 15 85 23
Lease financing receivables 5 7 5 7
$ 138 $ 22 $ 1,190 $ 425
Add-Recoveries:
Loans secured by real estate 10 7 10 7
Commercial and industrial loans 39 136 41 178
Consumer loans 3 5 16 9
Lease financing receivables 1 0 3 1
53 148 70 195
Net charge-offs (recoveries) 85 (126) 1,120 230
Balance at end of period $ 3,005 $ 3,954 $ 3,005 $ 3,954
Net Charge-offs (recoveries) to:
Average loans/leases .04% (.07%) .57% 1.30%
Loans/leases at end of period .04% (.07%) .57% 1.30%
Allowance for loan/lease losses 2.83% 3.19% 37.27% 5.82%
Allowance for loan/lease losses
as a percentage of:
Average loans/leases 1.53% 2.18% 1.53% 2.22%
Loans/leases at end of period 1.54% 2.17% 1.54% 2,17%
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.
<PAGE>
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
</TABLE>
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Non-Accrual Loans: 06-30-95 03-31-95 12-31-94 09-30-94 06-30-94
<S> <C> <C> <C> <C> <C>
Loans secured by real estate $ 2,745 $ 3,302 $ 4,173 $ 4,977 $ 5,200
Construction/Land development 52 58 68 0 84
Commercial and Industrial Loans 299 357 570 1,132 483
Consumer Loans 16 24 79 53 19
3,112 3,741 4,890 6,162 5,786
Loans Contractually
past due 90 days or more
still accruing:
Loans secured by real estate 201 117 260 81 229
Commercial and Industrial Loans 50 0 216 5 49
Consumer Loans 14 8 16 36 23
265 125 492 122 301
Restructured Loans 496 498 501 452 456
Total non-accrual, past
due and restructured
loans $ 3,873 $ 4,364 $ 5,883 $ 6,736 $ 6,543
Non-accrual, past due and
restructured loans
as a percentage of total
loans 1.98% 2.24% 3.00% 3.65% 3.55%
Allowance for loan
losses as a percentage of
non accrual, past due and
restructured loans 77.59% 62.79% 56.52% 47.04% 60.43%
OTHER REAL ESTATE
Other real estate owned - net $ 1,775 $ 1,540 $ 1,552 $ 1,659 $ 2,107
Total non-performing assets $ 5,648 $ 5,904 $ 7,435 $ 8,395 $ 8,650
Non-performing assets as a
percentage of total assets 2.19% 2.38% 3.06% 3.46% 3.58%
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
QUARTERLY AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(RATES ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
June 30, 1995 June 30, 1994
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Federal Funds sold and
temporary investments $ 5,664 $ 80 5.65% $ 5,003 $ 47 3.76%
Securities 34,830 579 6.65 27,133 413 6.09
Loans/leases 196,426 4,464 9.09 181,292 3,639 8.03
Total earning assets 236,920 $ 5,123 8.65 213,428 $ 4,099 7.68
Loan/lease loss allowance (2,869) (3,526)
All other assets 18,794 19,574
TOTAL ASSETS $252,845 $229,476
LIABILITIES AND EQUITY
Interest bearing deposits $191,257 $ 2,155 4.51 $173,847 $ 1,454 3.35
Borrowed funds 6,062 56 3.70 6,361 42 2.64
Total interest bearing
liabilities 197,319 $ 2,211 4.48 180,208 $ 1,496 3.32
Interest rate spread 4.17% 4.36%
Demand deposits 38,153 34,368
Other liabilities 902 471
Shareholders' equity 16,471 14,429
TOTAL LIABILITIES
AND EQUITY $252,845 $229,476
Net Interest Income $ 2,912 $ 2,603
Interest Earned/Earning Assets 8.65% 7.68%
Interest Expense/Earning Assets 3.73 2.80
Net Yield on Earning Assets 4.92% 4.88%
Deduct - Tax Equivalent Adjustment 4 5
NET INTEREST INCOME $ 2,908 $ 2,598
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
YEAR TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(RATES ON A TAX EQUIVALENT BASIS)
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
SIX MONTHS ENDED SIX MONTHS ENDED
June 30, 1995 June 30, 1994
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Federal Funds sold and
temporary investments $ 3,820 $ 112 5.86% $ 3,534 $ 61 3.45%
Securities 33,079 1,074 6.49 28,786 896 6.23
Loans/leases 196,037 8,706 8.88 178,479 7,161 8.02
Total earning assets 232,936 $ 9,892 8.49 210,799 $ 8,118 7.70
Loan/lease loss allowance (3,065) (3,498)
All other assets 18,804 19,573
TOTAL ASSETS $248,675 $226,874
LIABILITIES AND EQUITY
Interest bearing deposits $186,576 $ 3,984 4.27 $170,238 $ 2,799 3.29
Borrowed funds 7,437 153 4.11 8,031 103 2.57
Total interest bearing
liabilities 194,013 $ 4,137 4.26 178,269 $ 2,902 3.26
Interest rate spread 4.23% 4.44%
Demand deposits 37,596 33,829
Other liabilities 854 592
Shareholders' equity 16,212 14,184
TOTAL LIABILITIES
AND EQUITY $248,675 $226,874
Net Interest Income $ 5,755 $ 5,216
Interest Earned/Earning Assets 8.49% 7.70%
Interest Expense/Earning Assets 3.55 2.75
Net Yield on Earning Assets 4.94% 4.95%
Deduct - Tax Equivalent Adjustment 7 11
NET INTEREST INCOME $ 5,748 $ 5,205
</TABLE>
<PAGE>
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
The Corporation filed a report on Form 8-K on March 31, 1995
reporting the discovery of an alleged defalcation by a former
employee of the Corporation.
<PAGE>
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: August 10, 1995
Donald R. Chase
President and
Chief Executive Officer
Date: August 10, 1995
John M. Lilly, Treasurer and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000742070
<NAME> WESTBANK CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JAN-30-1995
<CASH> 11807
<INT-BEARING-DEPOSITS> 19
<FED-FUNDS-SOLD> 5500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17209
<INVESTMENTS-CARRYING> 20795
<INVESTMENTS-MARKET> 20831
<LOANS> 195580
<ALLOWANCE> 3005
<TOTAL-ASSETS> 257998
<DEPOSITS> 233325
<SHORT-TERM> 6329
<LIABILITIES-OTHER> 1505
<LONG-TERM> 0
<COMMON> 6356
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 257998
<INTEREST-LOAN> 8699
<INTEREST-INVEST> 1074
<INTEREST-OTHER> 112
<INTEREST-TOTAL> 9885
<INTEREST-DEPOSIT> 3984
<INTEREST-EXPENSE> 4137
<INTEREST-INCOME-NET> 5748
<LOAN-LOSSES> 800
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4362
<INCOME-PRETAX> 1621
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1402
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 4.94
<LOANS-NON> 3112
<LOANS-PAST> 265
<LOANS-TROUBLED> 496
<LOANS-PROBLEM> 3873
<ALLOWANCE-OPEN> 3325
<CHARGE-OFFS> 1190
<RECOVERIES> 70
<ALLOWANCE-CLOSE> 3005
<ALLOWANCE-DOMESTIC> 3005
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
