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, 1997
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: 3,490,358 shares
outstanding as of July 31, 1997.
<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 7-8
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 18
Signatures 19
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
(Dollar amounts in thousands) June 30, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest bearing $ 13,990 $ 10,463
Interest bearing 60 48
Federal Funds sold 7,600 12,890
Total cash and cash equivalents 21,650 23,401
Investment securities available for sale 17,578 14,387
Investment securities held to maturity (approximate
market value of $29,275 in 1997 and $21,357 in 1996) 29,272 21,295
Total securities 46,850 35,682
Loans $ 228,665 $ 215,207
Mortgage loans held-for-sale 4,976 5,466
Allowance for loan losses (2,560) (2,481)
Net-loans 231,081 218,192
Bank premises and equipment 4,459 4,339
Other real estate owned - net of
allowance for losses of $236 in
1996 and $65 in 1995 323 337
Accrued interest receivable 1,995 1,636
Other assets 1,538 1,322
TOTAL ASSETS $ 307,896 $ 284,909
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 45,387 $ 44,715
Interest bearing 228,975 210,776
Total Deposits 274,362 255,491
Borrowed funds 10,778 8,769
Accrued interest payable 371 328
Other liabilities 1,133 576
Total Liabilities 286,644 265,164
Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 3,473,046 shares in 1997 and
3,346,802 shares in 1996 6,946 6,694
Additional paid in capital 8,001 7,633
Retained earnings 6,376 5,517
Net unrealized gain (loss) on securities available
for sale (71) (99)
Total Stockholders' Equity 21,252 19,745
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 307,896 $ 284,909
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-97 06-30-96 06-30-97 06-30-96
<S> <C> <C> <C> <C>
Income:
Interest and fees on loans $4,869 $ 4,358 $ 9,512 $ 8,693
Interest and dividend income
on securities 792 626 1,462 1,162
Interest on temporary investments 37 69 152 150
Total interest and dividend income 5,698 5,053 11,126 10,005
Interest expense 2,534 2,147 4,945 4,218
Net interest income 3,164 2,906 6,181 5,787
Provision for loan losses 40 352 190 492
Net interest income after provision
for loan losses 3,124 2,554 5,991 5,295
Security gains 112
Other non-interest income 485 551 991 1,043
Total non-interest income 485 551 991 1,155
Non-interest expenses:
Salaries and benefits 1,139 1,036 2,267 2,080
Other real estate-provision for losses 23 50 23 181
-operating expenses 7 19 15 39
Other non-interest expense 931 919 1,865 1,859
Occupancy - net 223 226 446 443
Total non-interest expense 2,323 2,250 4,616 4,602
Income before income taxes 1,286 855 2,366 1,848
Income taxes 549 350 992 779
Net Income $ 737 $ 505 $ 1,374 $ 1,069
Net income per share $ 0.21 $ 0.15 $ 0.39 $ 0.32
Weighted average shares of common
stock and common share
equivalents 3,554,125 3,403,431 3,543,085 3,377,086
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1997
(1997 Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
COMMON STOCK ADDITIONAL ON SECURITIES
NUMBER OF PAR PAID IN RETAINED AVAILABLE
SHARES VALUE CAPITAL EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE-DECEMBER 31, 1995 3,221,603 $ 6,443 $ 7,141 $ 4,053 $ 66 $ 17,703
Net income - - - 2,248 - 2,248
Cash dividends declared
($.24 per share) - - - (784) - (784)
Shares issued:
Stock option plan 30,584 61 25 - - 86
Dividend reinvestment
and stock purchase plan 94,615 190 467 - - 657
Change in unrealized gain
(loss) on securities
available for sale - - - - (165) (165)
BALANCE-DECEMBER 31, 1996 3,346,802 6,694 7,633 5,517 (99) 19,745
Cash Dividend Declared
($0.15 per share) (515) (515)
Shares issued:
Stock Option Plan 76,743 154 60 214
Dividend Reinvestment
and Stock Purchase Plan 49,501 98 308 406
Change in unrealized gain (loss)
on securities available
for sale 28 28
Net income 1,374 1,374
BALANCE-JUNE 30, 1997 3,473,046 $ 6,946 $ 8,001 $ 6,376 $ (71) $ 21,252
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Dollar amounts in thousands)
1997 1996
Operating activities:
Net income $1,374 $ 1,069
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 190 492
Depreciation and amortization 327 309
Provision for other real estate owned 23 181
(Increase) Decrease in accrued interest receivable (359) (137)
Realized gain on sale of securities (112)
Realized (gain) loss on sale of other real estate owned 24
Realized (gain) loss on sale of loans (66)
Realized (gain) loss on sale of equipment (14) (17)
Increase (decrease) in interest payable on deposits 43 (9)
(Increase) decrease in other assets (216) (27)
Increase (decrease) in other liabilities 557 67
Net cash provided by operating activities 1,925 1,774
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (13,480) (6,382)
Proceeds from maturities and principal payments 5,492 3,286
Available for sale:
Purchases (4,013) (2,456)
Proceeds from sales 2,857
Proceeds from maturities 861 3,679
Purchases of premises and equipment (447) (1,071)
Net (increase) decrease in loans (13,164) (15,166)
Proceeds from sale of equipment 14 17
Proceeds from sale of other real estate owned 76 990
Net cash used in investing activities (24,661) (14,246)
Financing activities:
Net increase (decrease) in borrowings 2,009 5,117
Net increase (decrease) in deposits 18,871 9,846
Proceeds from exercise of stock options and
stock purchase plan 620 355
Dividends paid (515) (388)
Net cash used in financing activities 20,985 14,930
Increase (decrease) in cash and cash equivalents (1,751) 2,458
Cash and cash equivalents at beginning of period 23,401 12,604
Cash and cash equivalents at end of period $21,650 $15,062
Cash paid during the year:
Interest on deposits and other borrowings $4,902 $4,227
Income taxes 950 511
Transfers of loans to other real estate owned 85 1,481
Sales of other real estate owned financed by the bank 72
See notes to consolidated financial statements.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(Unaudited)
NOTE A - GENERAL INFORMATION
Westbank Corporation (hereinafter sometimes referred to as
"Westbank" or the "Corporation") 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" or the "Bank") into additional
financial services related to banking. Substantially all operating
income and net income of the Corporation are presently accounted for
by Park West.
NOTE B - CURRENT OPERATING ENVIRONMENT
The Corporation operates eleven banking offices located in Hampden
County and also operates a Trust Department providing services
normally associated with holding property in a fiduciary or agency
capacity. A full range of retail banking services are furnished to
individuals, businesses and non-profit organizations. The
Corporation's primary source of revenue is derived from providing
loans to customers, predominately located in Western Massachusetts.
The Corporation has recently received regulatory approval to open a
full service office in the town of Ludlow Massachusetts, the
targeted opening date for this new office is April, 1998.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") imposes significant regulatory restrictions and
requirements on banking institutions insured by the FDIC and their
holding companies. FDICIA established capital categories into which
financial institutions are placed based on capital level. Each
capital category establishes different degrees of regulatory
restrictions which can apply to a financial institution. As of June
30, 1997, Park West's capital was at a level that placed the Bank in
the "well capitalized" category as defined by FDICIA.
FDICIA imposes a variety of other restrictions and requirements on
insured banks. These include significant regulatory reporting
requirements such as insuring that a system of risk-based deposit
insurance premiums and civil money penalties for inaccurate deposit
assessment reports exists. In addition, FDICIA imposes a system of
regulatory standards for bank and bank holding company operations,
detailed truth in savings disclosure requirements, and restrictions
on activities authorized by state law but not authorized for
national banks.
NOTE C - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements for the quarter and six months ended June 30, 1997 and
1996 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 quarter and six month period
ended June 30, 1997, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
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, 1996.
NOTE D - NET INCOME 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 six months ended June 30, 1997 and 1996,
amounted to 3,543,085 and 3,377,086 shares, respectively.
<PAGE>
New Accounting Standard
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share," which establishes new standards for the
computation and disclosure of earnings per share ("EPS"). The new
statement requires dual presentation of "basic" EPS and "diluted"
EPS. Basic EPS is based on the weighted average number of common
shares outstanding for the period, excluding any dilutive common
shares equivalents. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were exercised or converted. The Company cannot adopt SFAS
128 until the fourth quarter of fiscal year 1997. Once adopted, all
prior period EPS data must be restated. The effect of SFAS 128, had
it been adopted beginning in fiscal year 1996, would have been to
present basic EPS that would have been greater than EPS actually
reported by $0.01 for the six months ended June 30, 1996 and by
$0.01 for the six month period ended June 30, 1997. The
presentation of diluted EPS would have been the same as EPS actually
reported for the respective periods.
NOTE E - 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 June 30, 1997 standby letters
of credit amounted to $575,000 and loan commitments were $28,407,000
and unused balances available on home equity lines of credit were
$7,652,000.
Trust Assets - Property with a book value of $108,009,000 at June
30, 1997 held for customers in a fiduciary or agency capacity, is
not included in the accompanying balance sheet since such items are
not assets of the Bank.
NOTE F - STOCKHOLDERS' EQUITY
The FDIC imposes leverage capital ratio requirements for state
non-member Banks. The Bank's leverage capital ratio as of June 30,
1997 and December 31, 1996 was 6.90% and 6.93% 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, 1997, for Tier 1 was 10.08% and total risk- based capital
was 11.33%, which meets the FDIC criteria for a well-capitalized
financial institution.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Changes in Financial Condition -
Total consolidated assets amounted to $307,896,000 on June 30, 1997,
compared to $284,909,000 on December 31, 1996. As of June 30, 1997
and June 30, 1996, earning assets amounted to, respectively,
$288,151,000 or 94% of total assets, and $269,293,000, or 94% of
total assets. Earning assets increased during the first six months
of 1997 as a result of increases in securities, loans and temporary
funds. Deposits originated throughout the Bank's branch system
provided the funds to support the increase in earning assets.
Changes in Results of Operations - For the quarter ended June 30,
1997, net income totaled $737,000 compared to $505,000 for the
quarter ended June 30, 1996. For the six months ended June 30,
1997, net income was $1,374,000 compared to $1,069,000 for the same
period during 1996. Included in the results of the six months ended
June 30, 1996 is a gain on the sale of securities totaling $112,000.
An overall increase in interest income and interest expense reflects
an increase in volume and decrease in interest rates on earning
assets and an increase in volume and rates on interest-bearing
deposits. Further analysis is provided in sections on net interest
revenue and supporting schedules.
Allowance for Loan/Lease Losses and Non-Performing Assets - A
significant decrease has been reflected in the provision for loan
losses in the current quarter with $40,000 being provided compared
to $352,000 for the same period in 1996. Loans and leases written
off against the allowance for loan/lease losses after recoveries
amounted to net recoveries of $96,000 for the six months ended June
30, 1997.
After giving effect to the actions described above, the allowance
for loan/lease losses at June 30, 1997 totaled $2,560,000 or 1.10%
of total loans/leases, as compared to $2,481,000 or 1.12% at
December 31, 1996.
Non-performing past due loans/leases at June 30, 1997 aggregated
$1,446,000 or 0.62% of total loans/leases compared to $2,361,000 or
1.07% at December 31, 1996. The percentage of non-performing and
past due loans/leases compared to total assets on those same dates,
respectively, amounted to 0.47% and 0.83%.
The change in non-performing loans was primarily the result of the
continued resolution of problem assets.
Other real estate owned remained level at June 30, 1997 totaling
$323,000 as compared to December 31, 1996 and stands at 0.10% of
total assets at the end of the current quarter.
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 loan/lease 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.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
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.
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.
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-97 06-30-96 06-30-97 06-30-96
Interest and divided income $5,698 $5,053 $11,126 $10,005
Interest expense 2,534 2,147 4,945 4,218
Net interest income $3,164 $2,906 $6,181 $5,787
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets $279,168 8.16% $247,775 8.16% $275,149 8.09% $243,170 8.23%
Interest-bearing
liabilities 229,261 4.42% 202,268 4.25% 225,941 4.38 197,180 4.28
Interest rate spread 3.74 3.91 3.71 3.95
Interest-free
resources used to
fund earning assets 49,907 45,507 49,208 45,990
Total Sources of Funds $279,168 3.63 $247,775 3.47 $275,149 3.59 $243,170 3.47
Net Yield on Earning Assets 4.53% 4.69% 4.50% 4.76%
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
<TABLE>
<CAPTION>
CHANGES IN NET INTEREST INCOME
(Dollar amounts in thousands)
QUARTER ENDED 06-30-97 SIX MONTHS ENDED 06-30-97
O V E R O V E R
QUARTER ENDED 06-30-96 SIX MONTHS ENDED 06-30-96
CHANGE DUE TO CHANGE DUE TO
VOLUME RATE TOTAL VOLUME RATE TOTAL
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $506 $5 $511 $996 $(177) $819
Securities 180 (14) 166 302 (2) 300
Federal funds (42) 10 (32) (13) 15 2
Total Interest Earned 644 1 645 1,285 (164) 1,121
Interest Expense:
Interest bearing deposits 278 86 364 620 90 710
Other Borrowed Funds 9 14 23 3 14 17
Total Interest Expense $287 $100 $387 $623 $104 $727
Net Interest Income $357 $(99) $258 $662 $(268) $394
</TABLE>
Net interest earned increased by $258,000 during the second quarter
of 1997 compared to the second quarter of 1996. For the six month
period ended June 30, 1997 net interest income increased by $394,000
versus the same period of 1996.
Average earning assets increased by $31,979,000 during the first six
months of 1997. The average earning base was $275,149,000 compared
to $243,170,000 in the same period last year.
OPERATING EXPENSES
The components of total operating expenses for the periods and their
percentage of gross income are as follows: (Dollar amounts in
thousands)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
06-30-97 06-30-96 06-30-97 06-30-96
Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and benefits $1,139 18.42% $1,036 18.49% $2,267 18.71% $2,080 18.64%
Other real estate - expense 30 0.48 69 1.23 38 0.31 220 1.97
Other non-interest expense 931 15.06 919 16.40 1,865 15.39 1,859 16.65
Occupancy - net 223 3.61 226 4.03 446 3.68 443 3.98
Total Operating Expenses $2,323 37.57% $2,250 40.15% $4,616 38.09% $4,602 41.24%
For the six month period ended June 30, 1997, operating expenses
increased by approximately $14,000 over the 1996 period. The
increase was a result of increases in salary and benefits totaling
$187,000 offset by reductions in other real estate expenses of
$182,000.
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
COMPONENTS RATIOS 6/30/97 6/30/96
Ratio of "Tier 1" leverage capital
to total assets at end of period 6.90% 6.93%
Regulatory risk-based capital requirements 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, 1997:
Tier 1 Capital (minimum required 4.00%) 10.06%
Tier 2 Capital (minimum required 8.00%) 11.31%
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, 1997.
(Dollar amounts in thousands)
Three Over Three Over One Over
Months Months to Year to Five
or Less One Year Five Years Years Total
Earning Assets $60,037 $42,411 $101,314 $84,389 $288,151
Interest Bearing
Liabilities 76,383 70,483 92,885 2 239,753
Interest Rate
Sensitivity Gap $(16,346) $(28,072) $8,429 $84,387 $48,398
Cumulative Interest
Rate
Sensitivity Gap $(16,346) $(44,418) $(35,989) $48,398
Interest Rate
Sensitivity
Gap Ratio (5.67)% (9.74)% 2.93% 29.28%
Cumulative Interest
Rate Sensitivity
Gap Ratio (5.67)% (15.41)% (12.48)% 16.80%
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (Continued)
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, 1997, the
Corporation's ratio of such assets to total deposits and borrowed
funds was 21.26%.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
</TABLE>
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
QUARTER ENDED SIX MONTHS ENDED
06-30-97 06-30-96 06-30-97 06-30-96
<S> <C> <C> <C> <C>
Balance at beginning of period $2,424 $3,916 $2,481 $3,707
Provision charged to expense 40 352 190 492
2,464 4,268 2,671 4,199
Charge-offs:
Loans secured by real estate 155 1,528 239 1,710
Commercial and industrial loans 12 75 143 89
Consumer loans 28 30 42 57
195 1,633 424 1,856
Recoveries:
Loans secured by real estate 111 6 130 289
Commercial and industrial loans 174 1 175 2
Consumer loans 5 5 7 12
Lease financing receivables 1 1 1
291 12 313 304
Net charge-offs (recoveries) (96) 1,621 111 1,552
Balance at end of period $2,560 $2,647 $2,560 $2,647
Net Charge-offs to:
Average loans (.04)% .79% .05% .77%
Loans at end of period (.04)% .77% .05% .74%
Allowance for loan losses (3.75)% 61.24% 4.34% 58.63%
Allowance for loan losses
as a percentage of:
Average loans 1.12% 1.29% 1.14% 1.31%
Loans at end of period 1.10% 1.26% 1.10% 1.26%
</TABLE>
The approach the Corporation uses in determining the adequacy of the
allowance for loan 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>
<CAPTION>
(Dollar amounts in thousands)
06-30-97 03-31-97 12-31-96 09-30-96 06-30-96
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans:
Loans secured by real estate $1,143 $1,377 $1,697 $1,910 $2,116
Construction/Land development 33 78 4 10 19
Commercial and Industrial Loans 240 238 372 750 856
Consumer Loans 5 14 6 1 1
1,421 1,707 2,079 2,671 2,992
Loans Contractually
past due 90 days or more
still accruing:
Loans secured by real estate 15 70 274 33 0
Commercial and Industrial Loans 0 76 0 6 43
Consumer Loans 10 14 8 0 0
25 160 282 39 43
Restructured Loans 0 0 0 0 78
Total non-accrual, past
due and restructured
loans $1,446 $1,867 $2,361 $2,710 $3,113
Non-accrual, past due and
restructured loans
as a percentage of total
loans 0.62% 0.84% 1.07% 1.26% 1.48%
Allowance for loan
losses as a percentage of
non accrual, past due and
restructured loans 177.04% 129.83% 105.08% 99.09% 85.03%
OTHER REAL ESTATE
Other real estate owned - net $323 $403 $337 $793 $1,303
Total non-performing assets $1,769 $2,270 $2,698 $3,503 $4,416
Non-performing assets as a
percentage of total assets 0.57% 0.77% 0.95% 1.24% 1.64%
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
QUARTERLY TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
JUNE 30, 1997 JUNE 30, 1996
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Federal Funds sold and
temporary investments $2,781 $37 5.32% $6,020 $69 4.58%
Securities 48,233 792 6.57 37,342 626 6.71
Loans/leases 228,154 4,869 8.54 204,413 4,358 8.53
Total earning assets 279,168 $5,698 8.16 247,775 $5,053 8.16
Loan loss allowance (2,500) (3,598)
All other assets 18,128 19,584
TOTAL ASSETS $294,796 $263,761
LIABILITIES AND EQUITY
Interest bearing deposits $219,436 $2,450 4.47 $193,624 $2,086 4.31
Borrowed funds 9,825 84 3.42 8,644 61 2.82
Total interest bearing
liabilities 229,261 $2,534 4.42 202,268 $2,147 4.25
Interest rate spread 3.72% 3.91%
Demand deposits 43,037 42,134
Other liabilities 1,687 1,148
Shareholders' equity 20,811 18,211
TOTAL LIABILITIES
AND EQUITY $294,796 $263,761
NET INTEREST INCOME $3,164 $2,906
Interest Earned/Earning Assets 8.16% 8.16%
Interest Expense/Earning Assets 3.63 3.47
Net Yield on Earning Assets 4.53% 4.69%
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
YEAR TO DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Federal Funds sold and
temporary investments $5,747 $152 5.29% $6,288 $150 4.77%
Securities 44,426 1,462 6.58 35,293 1,162 6.58
Loans/leases 224,976 9,512 8.46 201,589 8,693 8.62
Total earning assets 275,149 $11,126 8.09 243,170 $10,005 8.23
Loan loss allowance (2,518) (3,703)
All other assets 17,810 19,212
TOTAL ASSETS $290,441 $258,679
LIABILITIES AND EQUITY
Interest bearing deposits $217,254 $4,805 4.42 $188,679 $4,094 4.34
Borrowed funds 8,687 140 3.22 8,501 124 2.92
Total interest bearing
liabilities 225,941 $4,945 4.38 197,180 $4,218 4.28
Interest rate spread 3.71% 3.95%
Demand deposits 42,457 42,330
Other liabilities 1,564 1,102
Shareholders' equity 20,479 18,067
TOTAL LIABILITIES
AND EQUITY $290,441 $258,679
NET INTEREST INCOME $6,181 $5,787
Interest Earned/Earning Assets 8.09% 8.23%
Interest Expense/Earning Assets 3.59 3.47
Net Yield on Earning Assets 4.50% 4.76%
</TABLE>
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
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 Events
a. Information Concerning Forward-Looking Statements.
Westbank has made and may make in the future forward
looking statements concerning future performance, including
but not limited to future earnings, and events or
conditions which may affect such future performance. These
forward looking statements are based upon management's
expectations and belief concerning possible future
developments and the potential effect of such future
developments on Westbank. There is no assurance that such
future developments will be in accordance with management's
expectations and belief or that the effect of any future
developments on Westbank will be those anticipated by
Westbank management.
All assumptions that form the basis of any forward looking
statements regarding future performance, as well as events
or conditions which may affect such future performance, are
based on factors that are beyond Westbank's ability to
control or predict with precision, including future market
conditions and the behavior of other market participants.
Among the factors that could cause actual results to differ
materially from such forward looking statements are the
following:
1. The status of the economy in general, as well as in
Westbank's prime market area, Western Massachusetts;
2. The recovery of the real estate market in Western
Massachusetts;
3. Competition in Westbank's prime market area from other
banks, especially in light of continued consolidation
in the New England banking industry.
4. Any changes in federal and state bank regulatory
requirements;
5. Changes in interest rates; and
6. The cost and other effects of unanticipated legal and
administrative cases and proceedings, settlements and
investigations.
While Westbank periodically reassesses material trends
and uncertainties affecting the Corporation's
performance in connection with its preparation of
management's discussion and analysis of results of
operations and financial condition contained in its
quarterly and annual reports, Westbank does not intend
to review or revise any particular forward looking
statement in light of future events.
b. Registration on Form S-3
On June 19, 1997 the Corporation filed a registration
statement on Form S-3, which is hereby incorporated by
reference.
<PAGE>
c. Registration of Form S-8
On June 19, 1997 the Corporation filed a registration
statement on Form S-8, which is hereby incorporated by
reference.
ITEM 6. Exhibits and Reports on Form 8
a. Exhibits
EXHIBIT INDEX
Page No.
3. Articles of Organization, as amended **
(a) Articles of Organization, as amended *
(b) By-Laws, as amended *
10.1 Employment Contract dated October 1, 1986, between
William A. Franks, Jr. and Westbank Corporation ***
10.12 Termination Agreement dated February 20, 1987, between
Donald R. Chase and Park West Bank and Trust Company ***
10.14 Termination Agreement dated February 20, 1987, between
Stanley F. Osowski and CCB, Inc. ***
10.15 1985 Incentive Stock Option Plan for Key Employees *
10.16 1995 Directors Stock Option Plan ****
10.17 1996 Stock Incentive Plan *****
13. 1996 Annual Report to Stockholders ARS (IFC 1-36 IBC)
21. Subsidiaries of Registrant ******
27. Financial Data Schedule TO BE INCLUDED
* Incorporated by reference to identically numbered
exhibits contained in Registrant's Annual Report on
Form 10-K for the year ended December 31, 1988
** Incorporated by reference to identically numbered
exhibits contained in Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987
*** Incorporated by reference to identically numbered
exhibits contained in Registrant's Annual Report on
Form 10-K for the year ended December 31, 1986
**** Incorporated by reference to identically numbered
exhibits contained in Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995
***** Incorporated by reference to identically numbered
exhibits contained in Registrant's 1996 Proxy
Statement
****** Incorporated by reference to identically numbered
exhibits contained in Registrant's Annual Report
on Form 10-K for the year ended December 31,
1996.
b. Reports on Form-8 - None
<PAGE>
WESTBANK CORPORATION AND SUBSIDIARIES
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 7, 1997
Donald R. Chase
President and Chief Executive Officer
Date: August 7, 1997
John M. Lilly
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 13990
<INT-BEARING-DEPOSITS> 60
<FED-FUNDS-SOLD> 7600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17578
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<LOANS> 233641
<ALLOWANCE> 2560
<TOTAL-ASSETS> 307896
<DEPOSITS> 274362
<SHORT-TERM> 10778
<LIABILITIES-OTHER> 1504
<LONG-TERM> 0
0
0
<COMMON> 21252
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 307896
<INTEREST-LOAN> 9512
<INTEREST-INVEST> 1462
<INTEREST-OTHER> 152
<INTEREST-TOTAL> 11126
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<INTEREST-INCOME-NET> 6181
<LOAN-LOSSES> 190
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4616
<INCOME-PRETAX> 2366
<INCOME-PRE-EXTRAORDINARY> 2366
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1374
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 4.50
<LOANS-NON> 1421
<LOANS-PAST> 25
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1446
<ALLOWANCE-OPEN> 2481
<CHARGE-OFFS> 424
<RECOVERIES> 313
<ALLOWANCE-CLOSE> 2560
<ALLOWANCE-DOMESTIC> 2560
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
