<PAGE> 1
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, 2000
Commission file number 0 - 12784
WESTBANK CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2830731
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
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: 4,216,933 shares outstanding as of
April 30, 2000.
<PAGE> 2
WESTBANK CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income and Comprehensive Income 4
Condensed Consolidated Statements of Stockholders' Equity 5
Condensed Consolidated Statements of Comprehensive Income 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 Securities and Use of Proceeds 17
ITEM 3. Defaults upon Senior Securities 17
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 18
Signatures 20
</TABLE>
2
<PAGE> 3
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
(Dollar amounts in thousands) March 31, 2000 December 31, 1999
----------------------------- -------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks:
Non-interest bearing $ 14,762 $ 17,006
Interest bearing 1,032 1,147
Federal funds sold 129 13,389
-------- --------
Total cash and cash equivalents 15,923 31,542
-------- --------
Investment securities available for sale 81,122 69,516
Investment securities held to maturity
(approximate market value of
$11,296 in 2000 and $11,472 in 1999) 11,716 11,804
-------- --------
Total securities 92,838 81,320
-------- --------
Loans $438,180 $440,319
Mortgage loans held-for-sale 2,141 2,156
Allowance for loan losses 3,820 3,908
-------- --------
Net loans 436,501 438,567
Bank premises and equipment 7,650 7,809
Other real estate owned 512 442
Accrued interest receivable 2,676 3,243
Intangible assets 9,856 9,971
Other assets 4,391 3,256
-------- --------
TOTAL ASSETS $570,347 $576,150
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 58,851 $ 59,643
Interest bearing 419,893 419,253
-------- --------
Total Deposits 478,744 478,896
Borrowed funds 41,227 46,546
Accrued interest payable 646 732
Other liabilities 1,294 1,433
-------- --------
Total Liabilities 521,911 527,607
-------- --------
Mandatory redeemable preferred stock 17,000 17,000
-------- --------
Stockholders' Equity:
Common stock - $2 par value
Authorized - 9,000,000 shares
Issued - 4,233,870 shares in 2000 and
- 4,283,719 shares in 1999 8,567 8,567
Additional paid in capital 11,640 11,633
Retained earnings 13,789 13,317
Treasury stock (448)
Accumulated other comprehensive income(loss) (2,112) (1,974)
-------- --------
Total Stockholders' Equity 31,436 31,543
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $570,347 $576,150
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Three months ended March 31, 2000 1999
- ---------------------------- ---- ----
<S> <C> <C>
Income:
Interest and fees on loans $ 8,692 $ 6,029
Interest and dividend income on securities 1,523 1,276
Interest on temporary investments 68 38
---------- ----------
Total interest and dividend income 10,283 7,343
Interest expense 5,295 3,325
---------- ----------
Net interest income 4,988 4,018
Provision for loan losses 65 75
---------- ----------
Net interest income after
provision for loan losses 4,923 3,943
---------- ----------
Non-interest income:
Investment security gains(losses) 0 92
Other non-interest income 578 526
---------- ----------
Total non-interest income 578 618
---------- ----------
Non-interest expenses:
Salaries and benefits 2,042 1,497
Other non-interest expense 1,680 1,110
Occupancy - net 354 308
---------- ----------
Total non-interest expense 4,076 2,915
---------- ----------
Income before income taxes 1,425 1,646
Income taxes 524 625
---------- ----------
NET INCOME $ 901 $ 1,021
---------- ----------
Net income per share
- Basic $ 0.21 $ 0.24
- Diluted $ 0.21 $ 0.24
Weighted average shares outstanding
- Basic 4,272,683 4,210,870
- Dilutive Option Shares 58,027 127,855
---------- ----------
- Diluted 4,330,710 4,338,725
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1999 AND THREE MONTHS ENDED MARCH 31, 2000
(2000 Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
------------------ ADDITIONAL OTHER
NUMBER PAR PAID-IN RETAINED TREASURY COMPREHENSIVE
OF SHARES VALUE CAPITAL EARNINGS STOCK INCOME/(LOSS) TOTAL
--------- ----- ------- -------- ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 4,198,838 $8,397 $11,076 $10,803 $ 214 $30,490
Net income 4,167 4,167
Cash dividends declared
($.40 per share) (1,653) (1,653)
Shares issued:
Stock Option Plan 30,255 61 78 139
Dividend Reinvestment
and Stock Purchase Plan 54,626 109 479 588
Unrealized gain (loss) on
securities available for sale (2,188) (2,188)
-------- --------
BALANCE - DECEMBER 31, 1999 4,283,719 8,567 11,633 13,317 (1,974) 31,543
Net income 901 901
Cash dividends declared
($.10 per share) (429) (429)
Treasury shares:
Redeemed (66,100) (601) (601)
Reissued 16,251 7 153 160
Unrealized gain (loss) on
securities available for sale (138) (138)
-------- --------
BALANCE - MARCH 31, 2000 4,233,870 $8,567 $11,640 $13,789 (448) $(2,112) $31,436
========= ====== ======= ======= ===== ======== ========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended March 31, 2000 1999
- ---------------------------- ---- ----
<S> <C> <C>
Net Income $901 $1,021
---- ------
Unrealized gain (loss) on securities available for sale,
net of income taxes (benefit) of ($85) in 2000
and ($252) in 1999 (138) (411)
Less: reclassification adjustment for gains (losses)
included in net income, net of income taxes of
$35 in 1999 57
------
Other Comprehensive Income (Loss) (138) (354)
---- ------
COMPREHENSIVE INCOME $763 $ 667
==== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
WESTBANK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(Dollars amounts in thousands)
<TABLE>
<CAPTION>
Three months ended March 31 2000 1999
- --------------------------- ---- ----
<S> <C> <C>
Operating activities:
Net income $ 901 $ 1,021
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 65 75
Provision for other real estate owned 22
Depreciation and amortization 279 233
Intangible amortization 115
Realized gain on sale of securities (92)
Realized gain on sale of other real estate owned (7)
Decrease in accrued interest receivable 567 50
Increase in other assets (1,135) (91)
Increase/(decrease) in interest payable on deposits (86) 41
Increase/(decrease) in other liabilities 84 (21)
------- --------
Net cash provided by operating expenses 790 1,231
======= ========
Investing activities:
Investments and mortgage-backed securities:
Held to maturity:
Purchases (1,050)
Proceeds from maturities and principal payments 88 15,352
Available for sale:
Purchases (12,167) (8,000)
Proceeds from sales 4,771
Proceeds from maturities and principal payments 423 2,542
Purchases of premises and equipment (120) (259)
Net increase (decrease) in loans 1,853 (25,922)
Proceeds from sale of other real estate owned 78 187
------- --------
Net cash used in investing activities (9,845) (12,379)
======= ========
Financing activities:
Net (decrease) in borrowings (5,542) (10,480)
Net increase (decrease) in deposits (152) 20,781
Treasury stock (purchased)/issued, net (441) 173
Dividends paid (429) (380)
------- --------
Net cash (used in)/provided by financing activities (6,564) 10,094
======= ========
Decrease in cash and cash equivalents (15,619) (1,054)
Cash and cash equivalents at beginning of period 31,542 14,240
------- --------
Cash and cash equivalents at end of period $15,923 $ 13,186
======= ========
Cash paid:
Interest on deposits and other borrowings $ 5,381 $ 3,284
Income taxes 509 462
Supplemental disclosure of cash flow information:
Transfer of loans to other real estate owned 277
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
WESTBANK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(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 its banking subsidiaries, Park
West Bank and Trust Company ("Park West") and Cargill Bank ("Cargill") into
additional financial services related to banking. Substantially all operating
income and net income of the Corporation are presently accounted for by Park
West and Cargill.
NOTE B - CURRENT OPERATING ENVIRONMENT
Park West operates thirteen banking offices located in Hampden County,
Massachusetts, 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 is furnished to individuals, businesses and
non-profit organizations. Cargill Bank operates five offices in Windham County,
Connecticut. A full range of retail banking services is furnished to
individuals, businesses and non-profit organizations. The primary source of
revenue for Park West and Cargill is derived from providing loans to customers
who are predominantly located in Park West's and Cargill's service areas.
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 March 31, 2000,
Park West and Cargill's capital was at a level that placed the Banks 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
first quarter ended March 31, 2000 and 1999 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, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
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, 1999.
7
<PAGE> 8
NOTE D - ACQUISITION OF BRANCHES
On October 29, 1999, the Corporation completed its acquisition of the
Connecticut division of New London Trust, F.S.B. The two New London Trust
offices became part of Cargill Bank, increasing its number of offices to five.
The Corporation has accounted for this acquisition on the purchase method,
including the results of their operations since October 29, 1999. The intangible
assets are being amortized over fifteen (15) years.
The pro forma results of operations for the three months ended March 31, 1999,
as if this acquisition had occurred at the beginning of 1999, were as follows:
<TABLE>
<S> <C>
Net interest income $4,878
Net income $1,022
Basic earnings per share $ .24
Diluted earnings per share $ .23
</TABLE>
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 March 31, 2000, standby letters of credit amounted to
$772,000, loan commitments were $32,041,000 and unused balances available on
home equity lines of credit were $8,415,000.
Trust Assets - Property with a book value of $115,366,000 at March 31, 2000,
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.
In addition, the FDIC has established risk-based capital requirements for
insured institutions for Tier 1 risk-based capital of 4.00% and total risk-based
capital of 8.00%.
The capital ratios of Park West and Cargill as of March 31, 2000, were as
follows:
<TABLE>
<CAPTION>
Park West Bank
and Trust Company Cargill Bank
----------------- ------------
<S> <C> <C>
Leverage Capital Ratio 7.38% 6.05%
Tier 1 Risk-Based Capital 10.99% 11.03%
Total Risk-Based Capital 11.86% 12.29%
</TABLE>
As of March 31, 2000, both Park West and Cargill met the criteria which
classified them as well-capitalized financial institutions.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
CHANGES IN FINANCIAL CONDITION -
Total consolidated assets amounted to $570,347,000 on March 31, 2000, compared
to $576,150,000 on December 31, 1999. As of March 31, 2000, and March 31, 1999,
earning assets amounted to, respectively, $534,320,000 or 94% of total assets,
and $394,176,000 or 95% of total assets. Earning assets decreased during the
first three months of 2000 as a result of decreases in loans and temporary
investments. A similar decrease in borrowed funds offset the decline in earning
assets.
CHANGES IN RESULTS OF OPERATIONS -
For the quarter ended March 31, 2000, net income totaled $901,000 compared to
$1,021,000 for the three-month period ended March 31, 1999.
Non-interest income increased by $52,000 during the first quarter of 2000
compared to the first quarter of 1999. During the first quarter of 1999, the
Corporation recognized a gain on sale of securities available for sale totaling
$92,000.
Non-interest expense totaled $4,076,000 for the quarter ended March 31, 2000, an
increase of $1,161,000 versus the first quarter of 1999. Included in the results
for the period ended March 31, 2000 were approximately $230,000 in expenses
related to the integration of the New London Trust branch acquisition into the
Corporation's Connecticut banking subsidiary, Cargill Bank.
An overall increase in interest income and interest expense reflects an increase
in volume and a decrease in interest rates on earning assets and
interest-bearing deposits. Further analysis is provided in sections on net
interest revenue and supporting schedules.
The significant increase in net interest income and non-interest expense versus
the first quarter of 1999 is the result of the acquisition of the New London
Trust, F.S.B., branches.
ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS -
A decrease of $10,000 has been reflected in the provision for loan losses in the
quarter, with $65,000 being provided compared to $75,000 in 1999. Loans written
off against the allowance for loan losses after recoveries amounted to $153,000
for the first three months of 2000 versus $71,000 for the same period of 1999.
After giving effect to the actions described above, the allowance for loan
losses at March 31, 2000, totaled $3,820,000 or 0.87% of total loans, as
compared to $3,908,000 or 0.88% at December 31, 1999.
Non-performing past due loans at March 31, 2000, aggregated $1,377,000 or 0.31%
of total loans compared to $2,439,000 or 0.55% at December 31, 1999. The
percentage of non-performing and past due loans compared to total assets on
those same dates, respectively, amounted to 0.24% and 0.42%.
Other real estate owned increased during the most recent quarter by $70,000
compared to 1999 and totals $512,000. The percentage of other real estate owned
to total assets as of March 31, 2000, and December 31, 1999, amounted to 0.09%
and 0.08% respectively.
Management has made every effort to recognize all circumstances known at this
time which could affect the collectibility of loans and has reflected these in
deciding as to the provision for loan 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 and the balance in the
allowance for loan losses. Management deems that the provision for the quarter,
and the balance in the allowance for loan losses, are adequate based on results
provided by the loan grading system and circumstances known at this time.
9
<PAGE> 10
YEAR 2000
The transition of the Corporation and its computer system from the Year 1999
into the Year 2000 (Y2K) was without incident. All systems operated normally at
the start of the new year and at all subsequent critical dates, as outlined by
the Federal Financial Institution Examining Council. The approximate cost
incurred by the Corporation for Y2K readiness was $552,000. No significant
additional costs are expected during 2000. The Corporation will continue to
review Year 2000 issues throughout the current year.
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).
10
<PAGE> 11
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 subsidiaries, Park West Bank and Trust Company
and Cargill Bank
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Quarter ended March 31, 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Interest and dividend income $10,283 $7,343
Interest expense 5,295 3,325
------- ------
Net interest income 4,988 4,018
Tax equivalent adjustment 32 0
------- ------
NET INTEREST INCOME (TAXABLE EQUIVALENT) $ 5,020 $4,018
======= ======
</TABLE>
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Quarter ended March 31, 2000 1999
- ----------------------- ---- ----
Average Average
Balance Rate Balance Rate
------- ---- ------- ----
<S> <C> <C> <C> <C>
Earning Assets $531,480 7.76% $386,667 7.60%
-------- ---- -------- ----
Interest-bearing liabilities 474,709 4.46% 324,564 4.10%
-------- ---- -------- ----
Interest rate spread 3.30 3.50
-------- ---- -------- ----
Interest-free resources used
to fund earning assets 56,771 62,103
-------- ---- -------- ----
Total Sources of Funds $531,480 3.99 $386,667 3.44
-------- ---- -------- ----
NET YIELD ON EARNING ASSETS 3.77% 4.16%
======== ==== ======== ====
</TABLE>
11
<PAGE> 12
CHANGES IN NET INTEREST INCOME
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 2000
OVER
QUARTER ENDED MARCH 31, 1999
----------------------------
CHANGE DUE TO
VOLUME RATE TOTAL
------ ---- -----
<S> <C> <C> <C>
Interest Income:
Loans $2,668 $23 $2,691
Securities 153 98 251
Federal Funds 13 17 30
------ ---- ------
Total Interest Earned 2,834 138 2,972
Interest Expense:
Interest-bearing deposits 1,200 68 1,268
Other borrowed funds 497 205 702
------ ----- ------
Total Interest Expense 1,697 273 1,970
------ ----- ------
NET INTEREST INCOME $1,137 $(135) $1,002
====== ===== ======
</TABLE>
Net interest earned on a taxable equivalent basis increased to $5,020,000 in the
first quarter of 2000, up $1,002,000 as compared with the comparable period of
1999.
Average earning assets increased by $144,813,000 during the first quarter of
2000. The average earning base was $531,480,000 compared to $386,667,000 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
---------------------------------------------------------
3-31-00 3-31-99
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Salaries and benefits $2,042 18.80% $1,497 18.80%
Other non-interest expense 1,680 15.47 1,110 13.94
Occupancy - net 354 3.26 308 3.88
TOTAL OPERATING EXPENSES $4,076 37.53% $2,915 36.62%
</TABLE>
For the three-month period ended March 31, 2000, operating expenses increased by
approximately $1,161,000 over the 1999 period. Salaries and benefits increased
by $545,000, while other non-interest expense increased by $570,000 and
occupancy grew by $46,000. The increase is a direct result of the branch
acquisition on October 29, 1999 and the related staffing and operating costs.
12
<PAGE> 13
CAPITAL RATIOS
<TABLE>
<CAPTION>
03/31/00 12/31/99
-------- --------
<S> <C> <C>
The following is the Corporation's
ratio of "Tier I" leverage capital
to total assets at end of period 6.27% 6.34%
</TABLE>
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 (2) tiers. In this Corporation, Tier 1 includes the common
stockholders' equity and a portion of the mandatory redeemable preferred stock;
total risk-based, or supplementary, capital includes not only the equity but
also a portion of the allowance for loan losses and a portion of the mandatory
redeemable preferred stock.
The following are the Corporation's risk-based capital ratios at March 31, 2000:
<TABLE>
<S> <C>
Tier 1 Capital (minimum required 4.00%) 9.56%
Total Risk-Based Capital (minimum required 8.00%) 12.20%
</TABLE>
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,
2000:
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Over Three Over One
Months Months to Year to Over Five
or Less One Year Five Years Years Total
------- -------- ---------- ----- -----
<S> <C> <C> <C> <C> <C>
Earning Assets $ 63,587 $ 65,136 $ 156,588 $249,009 $534,320
Interest-Bearing
Liabilities 163,625 141,159 156,119 17,217 478,120
--------- --------- --------- -------- --------
Interest Rate
Sensitivity Gap $(100,038) $ (76,023) $ 469 $231,792 $ 56,200
========= ========= ========= ======== ========
Cumulative Interest
Rate Sensitivity Gap $(100,038) $(176,061) $(175,592) $ 56,200
Interest Rate
Sensitivity Gap Ratio (18.72)% (14.23)% 0.09% 43.38%
Cumulative Interest
Rate Sensitivity Gap Ratio (18.72)% (32.95)% (32.86)% 10.52%
</TABLE>
13
<PAGE> 14
LIQUIDITY
The Corporation's liquidity represents the ability to meet loan commitments,
deposit withdrawals and any other cash needs as they arise. Funds to meet
liquidity needs are available by converting liquid assets or by generating new
deposits or through other funding sources. Factors affecting a bank's liquidity
needs include changes in interest rates, demand for loan products and general
economic conditions. The Corporation has alternative sources of liquidity,
including federal funds lines of credit, lines of credit available through the
Federal Home Loan Bank of Boston and repurchase agreements. Management believes
that the Corporation's level of liquidity is adequate to meet current and future
funding needs.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Quarter ended March 31, 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Balance at beginning of period $3,908 $2,665
Provision charged to expense 65 75
------ ------
3,973 2,740
------ ------
Less charge-offs:
Loans secured by real estate 138 0
Commercial and industrial loans 12 87
Consumer loans 9 18
------ ------
159 105
------ ------
Add-recoveries:
Loans secured by real estate 0 16
Commercial and industrial loans 0 15
Consumer loans 6 3
------ ------
6 34
------ ------
Net charge-offs 153 71
------ ------
BALANCE AT END OF PERIOD $3,820 $2,669
====== ======
Net charge-offs to:
Average loans .03% .02%
Loans at end of period .03% .2%
Allowance for loan losses (at January 1) 3.92% 2.66%
Allowance for loan losses (at March 31)
as a percentage of:
Average loans .87% .87%
Loans at end of period .87% .83%
</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.
14
<PAGE> 15
NON-ACCRUAL, PAST DUE AND NON-PERFORMING LOANS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
03-31-00 12-31-99 09-30-99 06-30-99 03-31-99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 996 $2,001 $ 658 $ 595 $ 952
------ ------ ------ ------ -------
Loans contractually past
due 90 days or more
still accruing 381 438 357 245 147
------ ------ ------ ------ -------
Total non-accrual, past due
and restructured loans $1,377 $2,439 $1,015 $ 840 $ 1,099
====== ====== ====== ====== =======
Non-accrual, past due and
restructured loans as a
percentage of total loans 0.31% 0.55% 0.29% 0.25% 0.34%
====== ====== ====== ====== =======
Allowance for loan losses as a
percentage of non-accrual, past
due and restructured loans 277.41% 160.23% 262.27% 323.93% 264.52%
OTHER REAL ESTATE
Other real estate owned - net $ 512 $ 442 $ 84 $ 85 $ 347
====== ====== ====== ====== =======
Total non-performing assets $1,889 $2,881 $1,099 $ 925 $ 1,446
====== ====== ====== ====== =======
Non-performing assets as a
percentage of total assets 0.33% 0.50% 0.24% 0.21% 0.35%
====== ====== ====== ====== ======
</TABLE>
15
<PAGE> 16
QUARTER-TO-DATE AVERAGE BALANCES
INTEREST EARNED - INTEREST EXPENSE
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months ended March 31, 2000 1999
- ---------------------------- -------------------------------- ---------------------------------
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and
temporary investments $ 5,033 $ 68 5.40% $ 3,898 $ 38 3.90%
Securities 86,172 1,527 7.09 77,266 1,276 6.60
Loans 440,275 8,720 7.92 305,503 6,029 7.89
-------- ------- ---- -------- ------ ----
Total earning assets 531,480 $10,315 7.76% 386,667 $7,343 7.60%
-------- ------- ---- -------- ------ ----
Loan loss allowance (3,998) (2,681)
All other assets 38,888 22,615
-------- ------- ---- -------- ------ ----
TOTAL ASSETS $566,370 $406,601
======== ======= ==== ======== ====== ====
LIABILITIES AND EQUITY
Interest bearing deposits $414,303 $ 4,348 4.20% $299,707 $3,080 4.11%
Borrowed funds 60,406 947 6.27 24,857 245 3.94
-------- ------- ---- -------- ------ ----
Total interest bearing
liabilities 474,709 5,295 4.46 324,564 3,325 4.10
-------- ------- ---- -------- ------ ----
Interest rate spread 3.30% 3.50%
Demand deposits 58,117 49,222
Other liabilities 2,364 1,939
Shareholders' equity 31,180 30,876
-------- ------- ---- -------- ------ ----
TOTAL LIABILITIES
AND EQUITY $566,370 $406,601
======== ======= ==== ======== ====== ====
Net Interest Income(tax equivalent basis) $ 5,020 $4,018
Interest Earned/Earning Assets 7.76% 7.60%
Interest Expense/Earning Assets 3.99 3.44
-------- ------- ---- -------- ------ ----
Net Yield on Earning Assets 3.77% 4.16%
Deduct tax equivalent adjustment 32 0
-------- ------- ---- -------- ------ ----
NET INTEREST INCOME $ 4,988 $4,018
======== ======= ==== ======== ====== ====
</TABLE>
16
<PAGE> 17
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
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
</TABLE>
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 that 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 areas of Western Massachusetts and Northeastern
Connecticut;
2. The real estate market in Western Massachusetts and Northeastern
Connecticut;
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.
b. Registration on Form S-3
None
c. Registration of Form S-8
None
17
<PAGE> 18
ITEM 6. Exhibits and Reports on Form 8
a. Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
3. Articles of Organization, as amended **
(a) Articles of Organization, as amended *
(b) By-Laws, as amended *
10. Material Contracts - None
27. Financial Data Schedule To be included
</TABLE>
* 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.
b. Reports on Form 8-K - On January 13, 2000, the registrant filed a
current report on Form 8-K regarding the acquisition of certain assets
and assumption of certain liabilities of New London Trust, F.S.B.,
including two (2) branches in Connecticut and audited financial
statements of the assets and liabilities acquired.
18
<PAGE> 19
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 11, 2000 /s/ Donald R. Chase
-------------------------------------
Donald R. Chase
President and Chief Executive Officer
Date: May 11, 2000 /s/ John M. Lilly
-------------------------------------
John M. Lilly
Treasurer and Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 14,762
<INT-BEARING-DEPOSITS> 1,032
<FED-FUNDS-SOLD> 129
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 81,122
<INVESTMENTS-CARRYING> 11,716
<INVESTMENTS-MARKET> 11,296
<LOANS> 440,321
<ALLOWANCE> 3,820
<TOTAL-ASSETS> 570,347
<DEPOSITS> 478,744
<SHORT-TERM> 34,227
<LIABILITIES-OTHER> 1,940
<LONG-TERM> 7,000
17,000
0
<COMMON> 31,436
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 570,347
<INTEREST-LOAN> 8,692
<INTEREST-INVEST> 1,523
<INTEREST-OTHER> 68
<INTEREST-TOTAL> 10,283
<INTEREST-DEPOSIT> 4,348
<INTEREST-EXPENSE> 5,295
<INTEREST-INCOME-NET> 4,988
<LOAN-LOSSES> 65
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,076
<INCOME-PRETAX> 1,425
<INCOME-PRE-EXTRAORDINARY> 1,425
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 901
<EPS-BASIC> .21
<EPS-DILUTED> .21
<YIELD-ACTUAL> 3.77
<LOANS-NON> 996
<LOANS-PAST> 381
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,377
<ALLOWANCE-OPEN> 3,908
<CHARGE-OFFS> 159
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 3,820
<ALLOWANCE-DOMESTIC> 3,820
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
